HP rejects Xerox’s takeover bid, again

HP has yet again rejected Xerox Holding Corporation’s takeover bid in a letter issued to Xerox chief executive officer John Visentin.

The letter, from HP chairman Chip Bergh and CEO Enrique Lores, follows Xerox’s counter proposal, having obtained US$24 billion in binding financing commitments from Citi, Mizuho and Bank of America to complete its value-creating combination with HP.

However, HP mentioned that the binding financing commitment doesn’t address the issue that Xerox’s proposal “significantly undervalues” HP.

“We reiterate that the HP board of directors’ focus is on driving sustainable long-term value for HP shareholders,” the letter read.

“Your letter dated January 6, 2020 regarding financing does not address the key issue – that Xerox’s proposal significantly undervalues HP – and is not a basis for discussion.

“The HP board of directors remains committed to advancing the best interests of all HP shareholders and to pursuing the most value-creating opportunities.”

The letter from Xerox vice-chairman and CEO John Visentin stated that the binding financing commitment addresses HP’s uncertainty in Xerox raising the capital necessary to finance the takeover.

“It remains clear to all of us that bringing our companies together would deliver substantial synergies and meaningfully enhanced cash flow that could, in turn, enable increased investments in innovation and greater returns to shareholders,” Visentin said in that letter.

“But it also became clear from our dialogue with your shareholders that you and your advisors have been questioning our ability to raise the capital necessary to finance our proposal.

“We have always maintained that our proposal is not subject to a financing contingency, but in order to remove any doubt, we have obtained binding financing commitments (that are not subject to any due diligence condition) from Citi, Mizuho and Bank of America.”

Xerox initially made the unsolicited offer for HP on 5 November 2019, with Visentin writing to Bergh, outlining the proposal to combine the two companies and in doing so generating substantial synergies and strength in the balance sheet.

The proposal however was knocked back by Bergh saying the offer “significantly undervalues HP and is not in the best interests of HP shareholders”.

Visentin then offered HP shareholders US$17 per share in cash and 48 per cent of the pro forma of the combined company, which he said he believes is worth US$14 per share.

“The value of the transaction goes beyond economics. In consolidating industries, first movers not only win but also have an opportunity to reshape the competitive landscape in an enduring way,” he said previously.



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