HP Board Responds
In a letter sent to John Visentin, Xerox vice chairman and CEO, HP Inc.’ board stated: “Our board of directors has reviewed and considered your unsolicited proposal dated November 5, 2019 at a meeting with our financial and legal advisors and has unanimously concluded that it significantly undervalues HP and is not in the best interests of HP shareholders.”
They added: “We have great confidence in our strategy and our ability to execute to continue driving sustainable long-term value at HP. In addition, the board and management team continue to take actions to enhance shareholder value; including the deployment of our strong balance sheet for increased repurchases of our significantly undervalued stock and for value-creating M&A.
“We recognize the potential benefits of consolidation; and we are open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox. However, as we have previously shared in connection with our prior requests for diligence, we have fundamental questions that need to be addressed in our diligence of Xerox. We note the decline of Xerox’s revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018; this raises significant questions for us regarding the trajectory of your business and future prospects.
In the original letter from Visentin, dated November 5, 2019, the company made the following proposal.
“We are prepared to offer HP shareholders $22.00 per share comprised of $17.00 in cash and 0.137 Xerox shares for each HP share, for a total transaction value of approximately $33.5 billion; assuming 1,515 million fully diluted shares outstanding and the balance sheet as of July 31, 2019. Our offer implies 77% cash consideration, with the balance comprised of Xerox shares; resulting in HP shareholders owning approximately 48% of the combined company; allowing your shareholders to both realize immediate cash value and enjoy equal participation in the substantial upside of synergies resulting from our combination.
Xeroxed laid out several rationales for the proposal. Xerox stated: “A combination between us is supported by strong industrial logic given our respective strengths in the A3 and A4 markets; complementary footprint; deep cultural fit; and shared DNA of innovation. Our combined scale, product portfolio and global reach would allow us to compete effectively in the Production, Large Enterprise and SMB segments; while offering a truly differentiated Managed Services capability. It is difficult to conceive of a strategic alternative for either company that delivers superior value.”