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Xerox Raises Takeover Bid For HP To $24 Per Share

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Topline: After months of ongoing and increasingly tense merger negotiations between the two printing companies, Xerox announced on Monday that it would launch another bid to buy out HP, this time boosting its offer price to $24 per share—or around $34 billion in total.

  • The new offer, which Xerox indicated it would launch on or around March 2, 2020, would amount to $34 billion, consisting of $18.40 in cash and 0.149 Xerox shares for each HP share.
  • Xerox had originally made an unsolicited cash-and-stock offer of $22 per share, or $33.5 billion, to acquire HP last November. But HP’s board of directors unanimously rejected the proposal several times, arguing that the offer undervalued HP and wasn’t in the best interest of shareholders.
  • For its part, Xerox responded by going directly to HP shareholders in recent months in order to persuade them of the “tremendous value” and “synergies” that could be created from a merger between the two printing companies.
  • While there was initial doubt over whether Xerox would be able to raise the cash necessary to complete such a deal, Xerox last month secured $24 billion in financing from big banks to pursue its takeover—though talks were again rebuffed by HP.
  • Xerox officially launched its hostile takeover late last month, when it nominated 11 new directors to replace HP’s entire board at an upcoming shareholder meeting, setting the stage for a proxy battle.
  • In its announcement on Monday, Xerox said that it had met, “in some cases multiple times,” with many of HP’s largest shareholders, who “consistently state that they want the enhanced returns, improved growth prospects and best-in-class human capital that will result from a combination of Xerox and HP.”

Crucial quote: “The tender offer announced today will enable these [HP] stockholders to accept Xerox’s compelling offer despite HP’s consistent refusal to pursue the opportunity,” Xerox said in its announcement.

Crucial statistics: HP’s stock jumped on the news, rising by nearly 5% in premarket trading on Monday.

Tangent: Famed activist investor Carl Icahn, who has a net worth of $17.2 billion according to Forbes’ estimates, holds an 11% stake in Xerox and almost a 5% stake in HP. He’s been one of the deal’s biggest advocates: In December 2019, Icahn urged HP shareholders who agree with the merger to push for immediate action. Last month, in January, HP fired back at Icahn, blaming him for the hostile nature of the takeover: “We believe that Xerox’s proposal and nominations are being driven by Carl Icahn.” Because of his large ownership position in Xerox, HP said, Icahn’s interests “are not aligned with those of other HP shareholders” and he would “disproportionately benefit” from a merger between the two companies. HP also emphasized Icahn’s “meaningful influence” over Xerox and its board of directors.

Key background: Since it made the first unsolicited $33.5 billion cash-and-stock offer last November, Xerox has been pursuing a takeover of HP, a company more than three times its size. Xerox continues to present its case for a buyout directly to HP shareholders after months of increasingly tense relations between the two companies. Xerox has called the merger a “compelling opportunity” that would save both companies $2 billion over the next two years, and generate $1.5 billion in revenue over the next three years. But HP’s board has voiced concerns about Xerox’s business—highlighting its nearly 10% revenue decline in 2019, and speculating that a combined company would have too much debt. Both companies have struggled in recent years. Both have spun off different ventures in an effort to survive in a segment of the business that is at risk.  By recently nominating a new slate of directors for HP’s board, however, Xerox has taken its acquisition efforts hostile. Xerox CEO John Visentin said last month that HP shareholders will be “better served” by the new group of independent directors, who “appreciate the value that can be created” from a merger. But HP fired back, yet again: “These nominations are a self-serving tactic by Xerox to advance its proposal, which significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders,” a comapny spokesperson told Forbes last month.

Further reading: Spurned Again By HP, Xerox Prepares To Make A Hostile Buyout Bid

Xerox Secures $24 Billion For Hostile Takeover Bid Of HP

Xerox Escalates Hostile Takeover Of HP With Push To Replace Entire Board

Carl Icahn Driving Xerox's Hostile Takeover Bids, HP Claims

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