HP has once again rejected a takeover bid by Xerox, saying the proposal undervalues the computer and printer maker, and that the fact that Xerox has secured financing for the $33 billion offer is not a basis for a takeover discussion. CNBC's David Faber reports.
Previously, Xerox’s board of directors threatened to go to HP’s shareholders if the company does not reconsider its acquisition bid, Xerox said in a letter to HP directors Thursday.
In the letter, Xerox Vice Chairman and CEO John Visentin said his board “is determined to expeditiously pursue our proposed acquisition of HP to completion — we see no cause for further delay. Accordingly, 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.”
Shares of HP were down slightly and Xerox was up more than 1% by the end of the trading day. HP did not immediately respond to a request for comment.
HP’s board said Sunday that it unanimously rejected Xerox’s bid to buy the company, arguing the offer undervalued HP and was not in the best interest of shareholders. Xerox offered HP $22 per share in its takeover bid for the company, consisting of 77% cash and 23% stock, or $17 in cash and 0.137 Xerox share for each HP share.
“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’s board wrote when it rebuffed Xerox’s offer.
Visentin said Xerox’s directors were “very surprised” by HP’s decision to reject their bid.
“Frankly, we are confused by this reasoning in that your own financial advisor, Goldman Sachs & Co., set a $14 price target with a ‘sell’ rating for HP’s stock after you announced your restructuring plan on October 3, 2019,” Visentin wrote. “Our offer represents a 57% premium to Goldman’s price target and a 29% premium to HP’s 30-day volume weighted average trading price of $17.”
HP’s broad restructuring plan is aimed at saving the company $1 billion a year by the end of fiscal 2022. In October, HP announced it would lay off between 7,000 and 9,000 workers as part of that plan.
Activist investor Carl Icahn, who owns a 10.6% stake in Xerox, has been pushing for a merger between Xerox and HP, in which he recently bought a $1.2 billion stake. Icahn said he believed a combined company would be in the best interests of shareholders from both companies with the potential to cut costs.
HP has a market valuation of about $29 billion, more than three times the size of Xerox.
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