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Xerox's Takeover Offer Rejected Again, HP Calls it Too Low

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Xerox Holdings Corporation’s XRX hostile takeover bid of $24-a-share was dismissed by HP HPQ yesterday. The offer that included $18.4 in cash and 0.149 Xerox shares for each HP share, valued HP at roughly $35 billion.

HP stated that the offer “meaningfully undervalues HP and disproportionately benefits Xerox shareholders” and advised shareholders against tendering.

“The Xerox offer would leave our shareholders with an investment in a combined company that is burdened with an irresponsible level of debt and which would subsequently require unrealistic, unachievable synergies that would jeopardize the entire company,” stated Chip Bergh, chair of HP’s board of directors.

The board also alluded that Xerox sales have been sinking and its recent sale of interest in the Fuji-Xerox joint venture is a matter of concern.

Xerox has been considering the buyout since May 2019 and revealed its takeover offer in November with a $22 per share bid. HP had rejected the offer, stating that the deal undervalued the company and Xerox didn’t adequately explain its financial situation.

Xerox stated that it has secured financing from Citigroup C, Bank of America BAC, Mizuho Financial Group, Mitsubishi UFJ Financial Group, Credit Agricole, SunTrust Robinson Humphrey, Truist Financial and PNC Bank for the cash portion.

Xerox, in early February, increased the deal price to $24 a share and stated that it would launch a tender offer in March.  In response, HP went for “poison pill” defense, preventing investors from accumulating more than 20% stake in the company.

While things still remain uncertain, we believe there could be some real advantages of getting together. This is because these two companies lack certain capabilities that could be useful in a shrinking market.

Labels, packaging and signage for instance are fast growing areas of the market where HP shines but Xerox doesn’t have any offering. Similarly, the corporate copier business is where Xerox shines while HP has no presence.

So, together, they can bring customers the full range of paper-based solutions their clients need. Although this entire pie is shrinking, it helps to remain relevant as long as possible to generate strong cash flows that can support any refocus of the business.

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