Xerox secures US$24b financing commitment for HP acquisition

Xerox Holdings Corporation has sent a letter to HP’s board of directors confirming that it has obtained US$24 billion in binding financing commitments.

The US$24b is a commitment from Citi, Mizuho and Bank of America to complete its value-creating combination with HP.

The letter, from Xerox Holdings Corporation 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.

HP’s board of directors recently gave Xerox the thumbs down on its offer to buy the business for US$33.5b citing concerns about Xerox’s declining revenue and future business trajectory.

“Over the last several weeks, we have engaged in constructive dialogue with many of your largest shareholders regarding the strategic benefits of our proposal to acquire HP,” Visentin said, in the letter.

“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.

“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.

“My offer stands to meet with you in person, with or without your advisors, to begin negotiating this transaction.”

The move comes after Visentin 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.

“By harvesting these synergies, which can only be realised with this combination, the new pro forma company will be both more profitable and better positioned to provide customers with a stronger mix of products, services and support than either company can do on its own,” Visentin said previously.

“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.”

Xerox initially made the unsolicited offer for HP on 5 November 2019, with Visentin writing to HP chairman Chip 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”.

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