Xerox Lines Up More Financing, Reveals It Spent $5 Million Chasing HP In 2019
Xerox announced four new lending partners and disclosed how much each bank is willing to contribute to a purchase of HP. The cash is expected to come in two sums: a $19.5 billion payment and a $4.5 billion cash flow bridge payment.
Xerox said it burned through roughly $83,000 in cash every day it pursued a takeover of HP Inc., according to a U.S. Securities and Exchange Commission filing Friday.
Xerox, which started a public campaign to win over HP’s board and shareholders in early November, said it spent $5 million by the end of the 2019 chasing a deal with the company.
“These costs are primarily related to legal costs and other professional services and are expected to continue in future periods and may include additional types of costs,” Xerox stated in a 10-K filing Friday.
In the final two months of 2019, Xerox unveiled the deal, put forward a $22-per-share offer, and engaged in some public back and forth with HP over the merits of the transaction.
However, beginning in January, activity around the deal has picked up, with Xerox winning $24 billion in financing from three major lenders. It also nominated a full slate of directors that it intends to put forward to HP shareholders as replacements for the board that rejected its deal. It then upped its offer for HP from $22 to $24 per share.
Xerox Monday announced four new lending partners and disclosed how much each bank is willing to contribute to a potential purchase of HP. The cash is expected to come in two sums: a $19.5 billion payment and a $4.5 billion cash flow bridge payment.
Xerox’s first three partners were Citigroup, Mizuho and Bank of America. Its new lineup includes those three, plus Mitsubishi UFJ Financial Group, PNC Financial Services Group, Crédit Agricole Group and SunTrust Banks.
The seven banks will split the loans, with Citigroup and Mizuho contributing 22.75 percent, or about $5.46 billion. Bank of America will contribute $4.5 billion, Xerox stated. Mitsubish UFJ Financial Group has committed 12.5 percent, or $3 billion, while PNC has told Xerox it will contribute 10 percent, or $2.4 billion. Crédit Agricole will contribute 8.25 percent, or $1.98 billion, and SunTrust is willing to lend $1.2 billion.
Xerox also described how the loans would be used to complete the deal. It plans to use $19.5 billion for a senior unsecured 364-day term loan bridge facility, and a $4.5 billion senior unsecured 60-day term loan bridge facility.
“The 60-day term loan bridge facility is intended to bridge gaining access to cash on HP’s balance sheet that Xerox intends to use in a consensual transaction as a source of its acquisition financing,” Xerox wrote. “The funding of the debt facilities provided for in the Commitment Letter is contingent on the satisfaction of a limited number of customary conditions, including the consummation of the proposed acquisition of HP."
Meanwhile, the company said its early November deal with Fujifilm to sell its final remaining stake in Fuji Xerox for $2 billion, cost Xerox $12 million to transact, with most of that also coming in the form of attorney and consultant fees.