Xerox says it’s “determined” to pursue its proposed acquisition of HP and has threatened to take its $US33.5 billion buyout offer directly to HP shareholders if the HP board refuses to agree to “due diligence to support a friendly combination” before 25 November. HP has a market value of about $US27 billion, which is roughly three times the size of Xerox.
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| Xerox headquarters in Norwalk, Connecticut |
HP last week unanimously rejected Xerox’s offer of $US22 per share, saying it "significantly undervalues" the company, but said it was “open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox.”
In a letter to HP on Thursday, Xerox CEO John Visentin accused HP of delaying tactics. The full text of the letter sent to HP is as follows:
Dear Chip and Enrique,
We were very surprised that HP’s Board of Directors summarily rejected our compelling proposal to acquire HP for $22.00 per share, comprising $17.00 in cash and 0.137 Xerox shares for each HP share, claiming our offer "significantly undervalues" HP. Frankly, we are confused by this reasoning in that your own financial advisor, Goldman Sachs & Co., set a $14 price target with a "sell" rating for HP's stock after you announced your restructuring plan on October 3, 2019. Our offer represents a 57% premium to Goldman’s price target and a 29% premium to HP’s 30-day volume weighted average trading price of $17.
Moreover, our offer is neither "highly conditional" nor "uncertain" as you state. There will be NO financing condition to the completion of our acquisition of HP.
While we are glad to see that HP's Board of Directors acknowledges the substantial merits of a business combination between Xerox and HP and are open to exploring the value opportunity for our respective shareholders, your response lacks a clear path forward. You have requested customary due diligence, which we have accepted, but you have refused to agree to corresponding due diligence for Xerox. Any friendly process for a combination of this type requires mutual diligence—your proposal for one-way diligence is an unnecessary delay tactic. In light of favourable markets and terms, Xerox is determined to capture the compelling opportunity for our respective shareholders and strongly encourages HP’s Board of Directors not to sanction further delay in light of our extensive discussions to date.
Xerox remains willing to devote the resources necessary to complete mutual due diligence over the next three weeks and confirm the substantial cost and revenue synergies that we both believe could be achieved through a combination.
The Xerox Board of Directors is determined to expeditiously pursue our proposed acquisition of HP to completion—we see no cause for further delay. Accordingly, unless you and we agree on mutual confirmatory due diligence to support a friendly combination by 5:00 p.m. EST on Monday, November 25, 2019, Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders. The overwhelming support our offer will receive from HP shareholders should resolve any further doubts you have regarding the wisdom of swiftly moving forward to complete the transaction.
We look forward to your prompt response.
Sincerely,
John Visentin
Vice Chairman and CEO
Xerox Holdings Corporation
HP has yet to respond.
