HP Urges Shareholders To Ignore Xerox Tender Offer

Xerox is offering HP shareholders $24 per share as part of its attempted hostile takeover of its biggest rival in the printer industry.


HP Inc. has formally recommended that its shareholders ignore the $24-a-share tender offer from Xerox, which seeks to acquire all HP shares as part of Xerox's hostile takeover bid for the rival printer maker.

The recommendation from HP's board of directors is not a surprise since the board has repeatedly rebuffed Xerox's acquisition attempts since the initial takeover offer in November.

[Related: Xerox's Chances Of Acquiring HP 'Just Took A Dip': Analyst]

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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."

"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," said Chip Bergh, chair of HP's board, in a news release.

HP outlined some of the main reasons it sees for shareholders to ignore the Xerox offer in the news release, including:

- The Xerox Offer, in effect, principally offers HP shareholders something they already own, and would disproportionately benefit Xerox shareholders relative to HP shareholders.

- The Xerox Offer would use HP’s balance sheet as transaction consideration for the benefit of Xerox shareholders.

- The Xerox Offer meaningfully undervalues HP by failing to reflect the full value of HP’s assets and its standalone strategic and financial value creation plan.

- HP has a track record of execution that has resulted in strong, consistent operational and financial performance.

- The HP Board believes that HP’s standalone plan has positioned HP for significant value creation.

HP's board also believes that the Xerox offer "would compromise the future of HP and the value of shares of HP common stock by transferring value to Xerox shareholders and leaving HP shareholders with an investment in a combined company with an irresponsible capital structure, premised on unrealistic synergies estimates," the company said in the news release.

HP also supplied opinions from Goldman Sachs & Co. and Guggenheim Securities that say the Xerox tender offer is "inadequate from a financial point of view."

Xerox did not immediately respond to a request for comment 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, at a time when the industry is waning.

The tender offer is asking all HP shareholders to sell their shares to Xerox for $24 a share—equaling about $34.9 billion in total—via a combination of cash and Xerox shares.

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.