Determines Xerox proposal significantly undervalues HP and is not in best interests of HP shareholders.
Citing undervaluation as one of the reasons, HP’s board of directors unanimously rejected Xerox’s proposal to acquire the company. It states that the offer is not in the best interest of the shareholders.
The board of directors sent a letter conveying their decision to Xerox Vice Chairman and CEO John Visentin on November 17, 2019.
“In reaching this determination, the Board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company’s stock,” said the letter.
Xerox had offered 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.
HP announced in October that it will cut between 7,000 and 9,000 jobs by the end of fiscal 2022 as part of a broader restructuring plan that it estimates will save $1 billion a year. The cuts would amount to nearly 16% of its 55,000 employees across the world.
“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, which raises significant questions for us regarding the trajectory of your business and future prospects,” the board wrote.
“In addition, we believe it is critical to engage in a rigorous analysis of the achievable synergies from a potential combination,” the board wrote. “With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction.”
HP is worth $29 billion and is over three times the size of Xerox, which makes printers and copiers, in terms of market cap.
