Xerox Threatens HP With Proxy War

Xerox raised the stakes in its fight to take over HP Inc., telling the company’s CEO and chairman of the board that it will go directly to shareholders if the leaders fail to respond to its due diligence request by Monday.

“Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders,” Xerox CEO John Visentin said in an open letter. “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”

Visentin addressed the letter to “Chip and Enrique”—Chip Bergh is the HP board chairman and Enrique Lores is the company’s CEO—telling the two that Xerox was “very surprised” that HP’s board of directors summarily rejected our “compelling proposal” to acquire HP for $22.00 per share, given that HP’s financial advisers had set a lower target price for the company’s stock.

“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,” Visentin wrote. “Our offer represents a 57 percent premium to Goldman’s price target and a 29 percent premium to HP’s 30-day volume weighted average trading price of $17.”

Xerox was said to be happy the board of directors left the door open to a potential deal getting done, but insists that its initial offer as it stands is still the best path forward for the two companies to combine. Visentin is asking for Xerox to be allowed to carry out its own due diligence on HP.

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

The letters also suggests that the two sides have been talking at some length about a merger, with Visentin writing that they have had “extensive discussions.”

“In light of favorable 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,” he said. “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.”

Visentin has given HP a deadline to agree to mutual “confirmatory due diligence to support a friendly combination by 5:00 p.m. EST on Monday, November 25, 2019.”

After that Visentin said the company will take the case directly to shareholders.