Xerox, one of the world’s heavyweights in the printer industry, has recently tried to perform a takeover of the personal computer firm HP. HP rejected the company’s offer in spite of the billionaire investor, Carl Icahn, leaning on the company to accept the merger.
HP’s board of directors released a statement declaring that the unsolicited proposal was unanimously rejected. The report said that the offer of $33.5 billion meant that Xerox Holdings Corporation undervalued HP’s net worth and the merger would not be in the shareholders’ best interest.
Enrique Lores, chief executive officer of HP, told Xerox that there were concerns that the deal that Xerox proposed would leave the newly formed company with an “outsized” level of debt to deal with. Both he and the company’s chairman, Chip Bergh, did recognize the potential of a consolidation, suggesting that the door was open for further negotiations.
Questions Needing Answers
Lores and Bergh both agreed that they were open for exploration over the possible value to be gained for HP shareholders should there be a merger between the two companies. They have several reservations about the matter, however. Lores and Bergh stated that they have “fundamental questions” that they need to be answered by Xerox before anything can happen.
The Xerox Holdings Corporation had offered HP $22 per HP share. The sum was comprised of $17 cash with 0.137 of its own shares. It tallied up to HP’s shares gaining a 20% premium through the offer before the news broke out that the company was trying to do this in the first place.
Xerox is valued at around $8.5 billion at the time of offering. It was a rather unexpected move for the company to try and acquire its larger rival, but the CEO of Xerox, John Visentin, reasoned that it could save the two companies $2 billion a year.
Neither Lores nor Bergh were particularly impressed with this, however. Both questioned the acquisition’s merits through their response to the printing giant. They said that they had taken note of Xerox’s revenue going down to $9.2 billion from the previous $10.2 billion within the span of a year. Lores and Bergh consider this something that raises a large number of questions in regards to Xerox’s future prospects and business trajectory.
The two men are probing the company for information as well as partaking in “substantive engagement” with Xerox’s management team. This is all to see if the proposed merger would be possible and desirable by the company.
Icahn Leaning on HP
Carl Icahn holds a 4.24% stake in HP as well as a 10.6% stake in Xerox. The man pushed hard for the merger between the two companies, stating that declining industries tend to shrink slower than many market analysts predict. He concludes that they can thus generate a substantial amount of funds in spite of predictions.
The man is more than likely just trying to save the massive shares he has in Xerox.