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Xerox Plots Hostile Takeover

HP Facing Hostile Takeover Attempt Through Proxy Fight

On the rebound after breaking it off with Fujifilm, Xerox floated an unlikely proposal to buy out HP in November 2019. The $22 per share or $33.5 billion bid has been unanimously rejected by the HP Board multiple times, driving Xerox to go to the shareholders directly.

Investor Carl Icahn, who holds a 10.85% stake in Xerox and recently acquired a 4.24% stake in HP, has been the biggest proponent of the deal. In December, Icahn published an open letter (as he often does) to HP shareholders calling the proposed deal a “no-brainer.”

Seemingly unconcerned about the HP Board’s stance on the matter, Xerox announced in early January that it had secured $24 billion in financing for the $33 billion bid. HP responded to this and the push to meet in-person to continue negotiations: “Your letter dated January 6, 2020 regarding financing does not address the key issue – that Xerox’s proposal significantly undervalues HP – and is not a basis for discussion.”

In mid-January, Xerox announced its intention to nominate “11 independent candidates” to HP’s Board of Directors. Xerox CEO, John Visentin, stated, “We believe HP shareholders will be better served by a new slate of independent directors who understand the challenges of operating a global enterprise and appreciate the value that can be created by realizing the synergies of a combination with Xerox.”

HP Calls Out Icahn

The current HP Board’s response calls this move “a self-serving tactic by Xerox to advance its proposal, that significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders.”

HP goes on to call out Icahn directly as the architect of this scheme: “We believe that Xerox’s proposal and nominations are being driven by Carl Icahn, and his large ownership position in Xerox means that his interests are not aligned with those of other HP shareholders. Due to Mr. Icahn’s ownership position, he would disproportionately benefit from an acquisition of HP by Xerox at a price that undervalues HP.”

“Mr. Icahn has meaningful influence over Xerox and its Board of Directors given his ownership position; the role he played in the appointment of Xerox’s current CEO, who is a former Icahn consultant; and the ties Mr. Icahn has to members of the Xerox Board, including Xerox’s Chairman, an Icahn employee.”

HP reiterated its strong opposition to the bid following Xerox’s Q4 earnings report:
Xerox’s results do not alleviate the fundamental concerns about the continued revenue declines and health of the Xerox business. The fact remains: Xerox is relying on HP’s balance sheet to advance its proposal, which significantly undervalues HP and would require our shareholders to exchange the value of our businesses and the opportunities afforded by our balance sheet for stock in a company of questionable value and exposed to meaningful risk, due to inordinate leverage and sustained, declining performance.”