Xerox threatens to take HP bid hostile

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Xerox threatens to take HP bid hostile

Will go directly to shareholders if 'friendly' discussions don't occur.

Xerox on Thursday threatened to take its $33.5 billion (A$49.4 billion) buyout bid for HP Inc hostile, if the personal computer maker did not agree to a “friendly” discussion before November 25.

HP on Sunday rejected Xerox’s offer of US$22 per share, saying it undervalued the company, and that it was open to exploring a counter bid for the US printer maker.

“We are confused by this reasoning in that your own financial adviser, Goldman Sachs & Co, set a $14 price target with a ‘sell’ rating for HP’s stock after you announced your restructuring plan,” Xerox wrote in its letter to HP.

The median price target on HP stock by 15 analysts is US$20.

HP did not immediately respond to Reuters’ request for comment.

“Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders,” the company said in the letter.

HP said on Sunday the combined company would be saddled with “outsized debt” and was not in the best interest of its shareholders.

However, HP left the door open for a deal that would involve it becoming the acquirer of Xerox, and said it can evaluate the merits by accessing diligence information on Xerox.

Xerox on Thursday said it has accepted HP’s request for due diligence, but that HP has refused to open its books to Xerox.

“Any friendly process for a combination of this type requires mutual diligence - your proposal for one-way diligence is an unnecessary delay tactic,” Xerox wrote.

Many analysts have said there is merit in the companies combining to better cope with a stagnating printing market, but some cited challenges to integration, given their different offerings and pricing models.

“Xerox’s move could force HP to propose a higher acquisition price that would benefit HP shareholders, or potentially turn the tables and have HP look to acquire Xerox,” Morningstar analyst Mark Cash said.

Activist investor Carl Icahn, who took over Xerox’s board last year with fellow businessman Darwin Deason, told Wall Street Journal last week that he was not set on a particular structure for a deal with HP, as long as a combination is achieved. Icahn has a 4 percent stake in HP.

Xerox made the offer to HP, a company more than three times its size, on November 5, after it resolved a dispute with its joint venture partner Fujifilm that represented billions of dollars in potential liabilities.

Shares of Xerox were up 1 percent, while HP’s shares were little moved.

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