HP: Xerox's Latest Letter Is 'Not A Basis For Discussion'

Xerox CEO John Visentin had revealed a $24 billion funding commitment from three banks in a letter to HP leadership earlier this week.


HP Inc. is not budging after the latest volley in the takeover battle being waged by Xerox's management led by CEO John Visentin, who on Monday revealed $24 billion in financial backing for the deal.

After Visentin sought to ratchet up the pressure in Xerox's acquisition bid for HP--with a letter saying that Xerox has won the financing commitment from three banks--HP's board of directors on Wednesday responded to say that the development does not change anything for HP's leadership.

[Related: Fujifilm To End 58-Year-Old Xerox Joint Venture In March 2021]

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"Your letter dated January 6, 2020 regarding financing does not address the key issue – that Xerox's proposal significantly undervalues HP – and is not a basis for discussion," HP CEO Enrique Lores and Board Chair Chip Bergh said in the letter addressed to Visentin.

The three-sentence letter from HP management to Visentin is just the latest in a string of back-and-forth messages between Xerox and HP that have been posted publicly since November. HP previously accused Xerox of pursuing a "hostile" approach in its takeover attempt.

The new letter reiterates that HP's board is focused on "driving sustainable long-term value for HP shareholders"--which, it's implied, is not accomplished by the Xerox takeover offer.

"The HP Board of Directors remains committed to advancing the best interests of all HP shareholders and to pursuing the most value-creating opportunities," HP's management said in the letter.

Xerox declined to comment when reached by CRN on Wednesday.

In Visentin's letter from Monday, the Xerox CEO addressed HP leadership in saying that "you and your advisors have been questioning our ability to raise the capital necessary to finance our proposal."

"We have always maintained that our proposal is not subject to a financing contingency, but in order to remove any doubt, we have obtained binding financing commitments (that are not subject to any due diligence condition) from Citi, Mizuho and Bank of America," Visentin wrote.

The pledge of financing shows that major financial institutions—Citigroup Inc., Mizuho Financial Group and Bank Of America—support the revenue projections and logic behind the acquisition, which could yield $2 billion in cost synergies, according to Xerox sources who spoke with The Wall Street Journal.

On Nov. 5, Xerox made what amounted to a $22 a share offer to buy the much larger HP in a combined cash and stock deal that would give HP $17 per share, plus .137 in Xerox stock for each share of HP.

Combining Xerox and HP would bring together the leaders in printer and copier devices at a time when the industry is waning.

However, the leadership of HP said previously that it has "significant concerns about both the near-term health and long-term viability of [Xerox's] business that have a significant impact on Xerox's value," HP's board said. "The question of whether there is a path to turn around your business is a threshold issue."

Specific concerns cited by HP's board include Xerox's recent track record of missing consensus revenue estimates in four of the company's latest five quarters, along with a drop in revenue to $9.2 billion from $10.2 billion on a trailing 12-month basis since June 2018.