Following HP Inc’s rejection of the acquisition bid by Xerox Corporation, the latter has responded by sending a letter to members of HP’s board of directors telling them to reconsider the offer before it takes the case directly to HP shareholders.
The letter, from Xerox vice-chairman and CEO John Visentin said, “unless you and we agree on mutual confirmatory due diligence to support a friendly combination by 5:00 p.m. EST on Monday, November 25, 2019, Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders.
“The overwhelming support our offer will receive from HP shareholders should resolve any further doubts you have regarding the wisdom of swiftly moving forward to complete the transaction.”
HP’s board of directors recently gave Xerox the thumbs down on its offer to buy the business for US$33.5 billion, citing concerns about Xerox’s declining revenue and future business trajectory.
This amounts to US$22.00 per share, comprising of US$17.00 in cash and 0.137 Xerox shares for each HP share.
Visentin further elaborated on the letter that the company was surprised at the “compelling rejection” and HP’s claims of the offer “significantly undervaluing” HP.
“Frankly, we are confused by this reasoning in that your own financial advisor, Goldman Sachs & Co., set a US$14 price target with a “sell” rating for HP’s stock after you announced your restructuring plan on October 3, 2019,” the letter read.
“Our offer represents a 57 per cent premium to Goldman’s price target and a 29 per cent premium to HP’s 30-day volume weighted average trading price of US$17.”
Moreover, Visentin said that the offer is neither “highly conditional” nor “uncertain” as HP stated.
“There will be NO financing condition to the completion of our acquisition of HP,” he said.
“While we are glad to see that HP’s board of directors acknowledge the substantial merits of a business combination between Xerox and HP and are open to exploring the value opportunity for our respective shareholders, your response lacks a clear path forward.
“You have requested customary due diligence, which we have accepted, but you have refused to agree to corresponding due diligence for Xerox. Any friendly process for a combination of this type requires mutual diligence – your proposal for one-way diligence is an unnecessary delay tactic.
“In light of favorable markets and terms, Xerox is determined to capture the compelling opportunity for our respective shareholders and strongly encourages HP’s board of directors not to sanction further delay in light of our extensive discussions to date.
“Xerox remains willing to devote the resources necessary to complete mutual due diligence over the next three weeks and confirm the substantial cost and revenue synergies that we both believe could be achieved through a combination.”
Xerox also added that it determined to expeditiously pursue the proposed acquisition of HP to completion and sees no cause for further delay.
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