Xerox HP Buyout
Xerox HP Buyout Talks Continue
The HP board did acknowledge “potential benefits of consolidation” and stated openness to further discussion, dependent on diligence information on Xerox. In particular, the HP board cited “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 [HP]regarding the trajectory of [Xerox’s] business and future prospects.”
Xerox responded November 21, rejecting “one-way diligence” as a “delay tactic” and requesting that both companies undergo diligence to continue the discussion. Xerox then plunged forward, demanding response from HP by November 25th or “Xerox will take its compelling case to create superior value for our respective shareholders directly to [HP’s] shareholders. The overwhelming support [Xerox’s] offer will receive from HP shareholders should resolve any further doubts [HP has] regarding the wisdom of swiftly moving forward to complete the transaction.”
HP’s response came November 24th, reiterating their unanswered concerns and stating they will not be rushed or bullied by Xerox’s “aggressive words and actions,” that they are “not dependent on a Xerox combination,” and reiterated their concerns about Xerox. The HP board closed the letter reinforcing their commitment “to serving the best interests of HP shareholders, not Xerox and its shareholders. HP has numerous opportunities to create value for HP shareholders on a standalone basis. [HP] will not let aggressive tactics or hostile gestures distract us from [their] responsibility to pursue the most value-creating path.”
Xerox shot back November 26th, saying HP’s “refusal to engage in mutual due diligence with Xerox defies logic,” and cites the bump in both their stock values since their talks became public. Xerox went one to argue the concerns HP listed, point by point. The letter closes with a unapologetic response about Xerox’s “‘aggressive’ tactics” and a restated intention to “engage directly with HP shareholders to solicit their support in urging the HP Board to do the right thing and pursue this compelling opportunity.”
As previously stated, investor Carl Icahn is a strong proponent of the merger as he owns both a 10% stake in Xerox and recently purchased a $1.2 billion stake in HP.