HP and Xerox are two of the biggest name brands when it comes to printers. I mean, obviously HP are the bigger company but that hasn’t stopped Xerox from trying to acquire it. The board of directors for HP voted unanimously on Sunday to reject a proposal from Xerox to acquire the company. The reasons given were that the offer is not in the best interest of shareholders and would undervalue HP.
The offer Xerox tabled was US$22 per share, consisting of 77% cash and 23% stock, or US$17 in cash and 0.137 Xerox share for each HP share. I mean, it makes sense. HP is worth $29 Billion and is more than 3 times the size of Xerox in terms of market cap.
“In reaching this determination, the Board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company’s stock,”
“We note the decline of Xerox’s revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects,”
HP Board in a letter to John Visentin, Xerox’s CEO
HP however, did imply that they would be open to a merger should Xerox sweeten the deal. In what was a lesson in how not to be subtle, the board hinted that it would be open to a better deal by saying that “substantive engagement from Xerox management” could help it speed up the deal, should it happen.
It’s safe to say that HP is not ruling out being acquired. The company announced back in October that it will be cutting 7000-9000 jobs by the end of 2022 as part of a wider restructuring plan that is set to save them US$1 billion a year. At the same time, the company’s profits did grow in the summer, so it’s not exactly in dire straights as of yet. Whichever way this goes, it does look like a win-win for HP IF they can get better terms.