Xerox has filed a tender offer with the US Securities and Exchange Commission (SEC) for all outstanding shares of HP Inc. - the latest move in its nine-month fight for control of its larger rival. The move comes days after HP revealed that during talks last year between the two print giants, Xerox CEO John Visentin had suggested that HP should buy Xerox.
In a Tender Offer Statement lodged with SEC on Monday 2 March, Xerox Holdings Corp. offered HP investors a cash-and-stock offer worth $24 a share. For each HP share, a holder would receive $18.40 in cash and 0.149 Xerox shares. The offer will expire at 5:00 p.m. New York City time on April 21, 2020, unless the offer is extended, Connecticut-based Xerox said in a statement.
The purpose of the Offer is to acquire all of the outstanding Shares in order to combine the businesses of Xerox and HP. The Purchaser currently intends to seek maximum representation on the board of directors of HP (the “HP Board”) and, as soon as practicable after consummation of the Offer, to seek to have HP consummate a merger or other similar business combination with the Purchaser (the “Second-Step Merger”).
The Offer is being made without the prior approval of the HP Board.
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"Progress over entrenchment”:"
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“Our proposal offers progress over entrenchment,” said Visentin. “HP shareholders will receive $27 billion in immediate, upfront cash while retaining significant, long-term upside through equity ownership in a combined company with greater free cash flow to invest in growth and return to shareholders.”
HP’s board has rejected the offer as “irresponsible”, saying it undervalues the California-based company. In response, HP last week said it would return $16 billion to shareholders under a new capital return program during 2020-2022.
“It’s abundantly clear the revised Xerox proposal meaningfully undervalues HP, creates significant risk and compromises the future of our company,” said Enrique Lores, president and CEO, HP Inc.
HP said it would review Xerox’s offer over ten business days before advising shareholders.
In a regulatory filing last month, HP disclosed candid private conversations between HP and Xerox executives over a proposed merger.
“In discussions with HP's CEO in September, Xerox CEO John Visentin said he preferred to see his company acquired by HP — in part because it would take too much debt for Xerox to acquire HP, according to a regulatory filing from HP Inc,” said a report by Kyle Alspach of crn.com.
The comments came during a meeting between Visentin and then-HP CEO Dion Weisler in September, two months before Xerox launched a takeover bid for HP.
“Visentin told Weisler at the time that ‘strategically, Xerox’s Board believed that Xerox was out of organic growth opportunities and must either grow through a strategic acquisition or be acquired,’ HP said Thursday in the filing with the U.S. Securities and Exchange Commission,” the report said.
Visentin also informed Weisler that Xerox "had offered to buy Fujifilm Holdings Corporation’s interest in their joint venture, but Fuji had declined to enter into negotiations.
"Mr. Visentin further stated that Xerox could try to acquire HP, but that the extreme leverage that Xerox would need to take on to make such an acquisition and the resulting potential for a credit downgrade made it preferable for HP to acquire Xerox, according to the filing.”
The crn.com report also revealed: “On Aug. 12, activist investor Carl Icahn — a major Xerox shareholder, who had backed the appointment of Visentin as CEO of the company — contacted Weisler to disclose he'd bought 4.125 percent of HP shares, according to the filing. 'Mr. Icahn further expressed his belief that there was considerable value in combining Xerox and HP, that HP should consider buying Xerox (or, if not, that Mr. Icahn would consider making an offer to acquire HP) and that he wanted a transaction to occur quickly,' HP said in the filing."
Icahn, who has a 4.2% stake in HP and a 10.9% stake in Xerox, has urged HP shareholders to accept the offer.
Xerox plans to nominate 11 independent candidates to HP’s board at the company’s next annual meeting.
