Xerox Tender Offer For All HP Shares Has 'Commenced'

Xerox's hostile takeover bid for HP Inc. is taking a major step with the start of the company's $34.9 billion tender offer.

The offer is asking all HP shareholders to sell their shares to Xerox for $24 a share, via a combination of cash and Xerox shares.

[Related: HP Claims Visentin First Asked It To Acquire Xerox]

HP's board of directors has repeatedly rejected the takeover deal since it was first proposed by Xerox in November.

On Monday, HP confirmed that the "unsolicited exchange offer to acquire all outstanding shares of HP common stock" has "commenced."

HP's board will "carefully review and evaluate the Offer to determine the course of action that the Board believes is in the best interests of the Company and all HP shareholders," the company said in a news release. "HP shareholders are advised to take no action at this time pending the Board’s review and evaluation of the Offer."

HP pledged to advise shareholders of the board's position on the offer within 10 business days.

In a news release, 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.

HP executives also laid out their fullest case yet for why they believe the Xerox proposal is a bad deal for everyone other than Xerox.

The Xerox bid “compromises the future of HP and the value of HP's shares,” HP CEO Enrique Lores said during the company's quarterly call with analysts last week.

Also on Monday, Xerox 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.

In speaking with CRN, a number of HP partners have been critical of the Xerox takeover attempt in the months since it was announced.

With HP being the second-largest PC maker in the world, Xerox's lack of a PC business of its own is a serious concern, said Juan Fernandez, vice president of managed IT services at ImageNet Consulting, in an interview with CRN on Monday.

"There may be opportunities on the print side of the house. But from the PC side of the house, I just don't see it," Fernandez said. "The focus is very obvious -- Xerox is a print company, and they seem to see the opportunity as a chance to consolidate the two on the print side. That leaves out such a large piece of what HPI is."

Fernandez pointed to recent launches such as the lightweight Elite Dragonfly business notebook as an example of HP's commitment to innovation in the PC category, and as the reason that the company is seeing "great momentum" in that business.

"HP is taking big strides" in the PC market, he said. "I just don't want to see that stop."

The comments echoed what Lores himself said last week in speaking about Xerox's hostile takeover bid.

With HP Inc. and Xerox, "we are looking at two very different companies," Lores said. "HP is a global leader in both personal systems and print. Xerox has no presence in personal systems."