Carl Icahn rattles cage on Xerox takeover of HP

Carl Icahn, a sizeable shareholder in both HP and Xerox, has issued an open letter to fellow HP shareholders urging them to push HP’s board of directors to accept Xerox’s $US33.5 billion takeover bid.

Icahn owns 10.85 per cent of Xerox Corporation shares and 4.24 per cent of HP shares which he says makes him the largest shareholder in each company.

In the letter, Icahn launches a stinging tirade about HP’s refusal to engage in mutual due diligence processes while also questioning whether this refusal is also about preserving the “lucrative positions of the CEO and members of the board”.

“While this might sound cynical, over the last several decades as an activist I have made billions and billions of dollars not only for Icahn Enterprises but for all shareholders by standing up to managements and boards that have refused to do anything that would change the status quo, which might mean threatening their huge incomes,” Icahn writes.

“While there are many good and caring boards and managements, there also are many terrible ones that have cost shareholders dearly by failing to act in their best interests, as HP’s board and management seem to be doing now.”

Icahn continues, “I cannot believe that the recalcitrance of HP’s board is driven by any real confidence in its standalone restructuring plan, which the market, shareholders and analysts met with extreme indifference and which seems to amount to little more than rearranging the deck chairs on the Titanic.

“The road to the graveyard on Wall Street is littered with the bones of companies, such as Eastman Kodak, which wasted a great deal of valuable time by coming up with one ill-fated plan after another and also failed to act decisively when transformative opportunities presented themselves.

“It is absurd for the HP board and management team, with such a history of underperformance and missteps, to claim to have had a sudden epiphany and now expect shareholders to trust them to execute a standalone restructuring plan rather than to even explore an opportunity to enter into a combination that could bring about a much needed $2+ billion of cost synergies and possibly save the company.

The latest in the ongoing tit-for-tat

Icahn’s letter is the latest in a tit-for-tat regarding the potential mega-merger of US technology giants Xerox and HP.

Xerox Corporation fired the first missive in on November 5, 2019 when it made an unsolicited offer of $US33.5b for the business. This included paying HP shareholders $US22 per share comprised on $US17 in cash and 0.137 Xerox shares for each HP share.

This offer from Xerox Corporation’s chairman and CEO John Visentin was knocked back by HP chairman Chip Bergh with Xerox’s declining revenue and future business trajectory cited as the reason for the refusal.

Xerox chairman and CEO John Visentin

Then on November 21, 2019 Visentin again wrote to HP’s board of directors asking them to reconsider before it took up the case directly with HP shareholders.

A key plank of Xerox’s case for the acquisition of HP was that the combined strength of the two businesses would present a strong industrial logic given the strengths of both businesses in the A3 and A4 markets, complementary footprint, deep cultural fit and shared DNA of innovation.

Xerox also said its board of directors strongly felt the industry is overdue for consolidation, adding those that move first will have a distinct advantage in a declining macro environment.

“By combining R&D capabilities and financial resources, together we can accelerate the transformation of our businesses and take a leadership role in key growth markets such as: 3D Printing, Digital Packaging and Labels, Graphics, Textile Printing, Workflow Software and IoT Enabled Services,” the initial letter said.

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