Xerox gives HP acquisition ultimatum following rejected merger bid

Xerox just threatened HP with a hostile takeover after HP turned down its acquisition offer.
Image: Cody DeBos / The Burn-In

Earlier this week, The Burn-In reported that HP rejected Xerox’s $33.5 billion acquisition bid. In response, the office equipment maker has given the electronic’s firm an ultimatum. Xerox is demanding that HP reconsider its offer, or it will make its case to the laptop maker’s shareholders.

Xerox’s Hostile Takeover Threat

On Thursday, Xerox Vice Chairman and CEO Justin Visentin sent HP’s board a letter outlining a hostile takeover threat. In it, the executive reiterated his company’s interest in acquiring the rival electronics manufacturer. He also expressed surprise at the Palo Alto, California-based company’s rejection.

Visentin noted that HP’s financial advisor Goldman Sachs & Co. pegged its sale price at $14 per share in October. As such, Xerox’s bid to buy the firm at $22 per share represented a 57 percent premium. Moreover, the CEO said that his company’s offer represents a 29 percent premium based on HP’s $17 30-day average stock price.

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Xerox also called HP’s post-offer rejection request for one-way due diligence an “unnecessary delay tactic.” Consequently, the Norwalk, Connecticut company said it would mount a hostile takeover attempt if HP doesn’t return to the negotiating table.

Unlikely Progression of the Buyout Story

Though relations between the two companies are now strained, HP and Xerox had reportedly been discussing a merger since September. However, discussions broke down once the copier company finally made an offer.

In their company’s rejection letter, HP Chief Executive Officer Enrique Lores and Chairman Chip Bergh argued that Xerox had undervalued the firm. In addition, the executives expressed concern about their suitor’s financial outlook. Specifically, the pair noted that the manufacturer’s revenue generation has been on the decline since June 2018.

That said, HP didn’t completely close the door on a possible merger. Instead, it asked for a detailed look at Xerox’s books before moving forward. The firm also reportedly considered making an acquisition bid for its competitor because it sees value in consolidation. Indeed, the equipment manufacturer’s offer noted that a merger between the two corporations would result in an annual $2 billion in savings.

While not directly mentioned, HP also likely has concerns about how Xerox would facilitate the proposed merger. As of this writing, the consumer electronics company has a market capitalization of $29.54 billion. Conversely, Xerox is currently worth $8.44 billion.

Xerox reportedly intended to finance its acquisition of HP with funds from an unnamed bank. However, the company’s deal with the financial institution was said to be informal.