Xerox turns to public stocks in merger war with HP

Xerox has ramped up the stakes in its fight to merge with HP through its plan to launch a tender offer on 2 March, valuing HP’s common stock at $24 (£18.5) per share.

The move comes even after HP’s board of directors unanimously rejected a $30 billion (£23 billion) bid from Xerox this past November, which in contrast, valued HP stock at $22 (£17) per share. HP stated in a letter to Xerox that the offer "significantly undervalues HP and is not in the best interests of HP shareholders".

The letter additionally described Xerox’s offer as “highly conditional and uncertain. In particular, there continues to be uncertainty regarding Xerox’s ability to raise the cash portion of the proposed consideration and concerns regarding the prudence of the resulting outsized debt burden on the value of the combined company’s stock even if the financing were obtained.”

Last month, Xerox further escalated the bounds of its offer by proposing to replace HP’s eleven board members with current and former investment bankers and consultants. The upcoming tender offer will place the financial future for both companies directly into the hands of HP shareholders.

"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," Xerox CEO John Visentin said in a statement.

Despite HP’s consistent rejections, both companies have faced economic difficulty in the recent past: HP announced in October its plan to cut between 7,000 and 9,000 jobs by 2022. While HP has seen slight yearly revenue increases since its split from HPE back in 2015, Xerox’s revenue has been consistently falling over recent years.

HP hasn’t directly responded to Xerox’s latest gambit, but is due to announce its first quarter earnings for its 2020 financial year on 24 February. In a statement issued ahead of the announcement, which will be made via live webcast, the company said: “At that time, HP will share additional information about its plan to drive sustainable long-term value for its shareholders, including through the execution of the company’s multi-year strategic and financial plan and the deployment of its strong balance sheet.

“HP wants its shareholders to have full information on the Company’s earnings and the value inherent in the Company before responding to Xerox’s February 10 press release.”