HP Reportedly Open To Other Acquisitions As Xerox Remains Hostile

HP’s attempts to revive talks with Xerox don’t appear to have borne fruit.


The chances of HP Inc. acquiring Xerox as an alternative to Xerox's $34.9 billion hostile takeover bid may be fading.

While HP CEO Enrique Lores had reached out to Xerox CEO John Visentin to ask for further talks about two weeks ago, it doesn't appear to have resulted in much. On Monday, Xerox pushed ahead with its tender offer that asks all HP shareholders to sell their shares for $24 a piece.

[Related: 10 Big Things HP Just Said About Xerox]

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Now, HP is reportedly looking into other acquisitions--potentially seeking to combine forces with companies besides Xerox. The declining print industry is widely considered to be ripe for consolidation.

On Thursday, the Financial Times quoted Lores as saying that "there are other potential M&A [transactions] that we are constantly analysing."

"HP has a very global portfolio and M&A is a way to create value for our shareholders," Lores reportedly said.

“Consolidation is going to happen in this space,” he said, according to the report.

Also on Thursday, HP formally recommended that its shareholders ignore the $24-a-share tender offer from Xerox.

While HP shareholders do not need to take any action if they want to hold onto their shares, HP said it wanted to send a message to shareholders as they mulled over the decision: that "the Xerox offer undervalues HP and disproportionately benefits Xerox shareholders at the expense of HP shareholders."

Xerox declined to comment on the HP recommendation and Lores' comments on M&A on Thursday.

Despite being the far smaller of the two companies, Xerox has been seeking to absorb HP in order to bring together the largest players in the copier and printer markets.

In a news release announcing the tender offer on Monday, Xerox CEO John Visentin said that his company’s proposal “offers progress over entrenchment.”

“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,” Visentin said.

The offer will expire on April 21, “unless the offer is extended,” Xerox said.

Last month, HP adopted a shareholder rights plan that aims to stymie the takeover while committing to a capital return plan that includes an $8 billion share buyback in the year following HP's 2020 annual meeting.

At the time, HP also responded to the argument by Visentin that the Xerox takeover is necessary because the waning printer and copier industry needs to see more business combinations. For instance, in January, Visentin said during a Xerox call with analysts that "the printing industry is decades overdue for consolidation and the first mover will have a significant advantage."

HP does agree that "additional value can be created through consolidation," Lores said on Feb. 24 during the company’s quarterly call with analysts.

"In fact, instead of talking about being a first mover, we have been a first mover," he said. "Our acquisition of Samsung's printer business in 2017 is an important example. However, anything we consider and anything we do must first and foremost make sense for HP shareholders."