HP board of directors has unanimously rejected Xerox’s takeover offer but is leaving open the possibility of a merger with Xerox under different terms.
In a letter to Xerox CEO John Visentin made public by HP on Sunday, HP’s board said that it has reviewed the “unsolicited” takeover proposal from 5 November and “has unanimously concluded that it significantly undervalues HP and is not in the best interests of HP shareholders.”
“We have great confidence in our strategy and our ability to execute to continue driving sustainable long-term value at HP,” the company said.
Xerox offered $22 a share for HP–$17 per share in cash and the rest in Xerox stock–with HP shareholders ending up with a 48-per cent stake in the combined company. That would represent a roughly 20 percent premium above HP’s closing stock price and would value HP at about $33 billion.
HP had a market capitalisation of $29.9 billion compared to Xerox’s market cap of $8.42 billion.
HP’s board did “recognise the potential benefits of consolidation, and was open to exploring whether there is value to be created for HP shareholders” through a potential combination with Xerox.
“However, as we have previously shared in connection with our prior requests for diligence, we have fundamental questions that need to be addressed in our diligence of Xerox. We note the decline of Xerox’s revenue from $10.2 billion to $9.2 billion since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects”, the letter said.
HP said it believes it is “critical to engage in a rigorous analysis of the achievable synergies” from a potential merger. “With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction,” HP’s board said. “We remain ready to engage with you to better understand your business and any value to be created from a combination.”
