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Flash Reports 2 minutes

HP’s Board Rejects Xerox’s $33.5 Billion Takeover Offer but Remains Open to Further Consideration

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Coresight Research

What's Inside

HP’s board rejected Xerox acquisition bid, saying the offer undervalues the company and is not in the interests of the shareholders.

  • The company also expressed concerns about Xerox’s declining fortunes and the debt that would be needed to finance the acquisition.
  • HP is in the midst of a restructuring plan to simplify its operating model and become more digitally enabled.
  • HP hopes the plan will shave $1 billion in annual cost.

Management cited its confidence in its strategy and ability to execute to drive sustainable long-term value as part of the reason for rejecting the offer, but did say it remained open to exploring whether there is value for HP shareholders through a combination with Xerox.

Key Points

On November 17, 2019, HP Inc. announced that its board of directors unanimously rejected Xerox’s bid to acquire the company.

  • On November 5, 2019, Xerox made an offer to acquire HP for a transaction value of $33.5 billion, comprised of 77% in cash and 23% in Xerox stock.
  • The bid represents a 20% premium to HP’s November 5 closing share price of $18.40.
  • HP cited what it said was Xerox’s undervaluation of the company and the interests of shareholders as reasons for rejecting the offer.

On Sunday, November 17, 2019, HP Inc. announced that its board of directors had unanimously decided to reject an acquisition bid from Xerox. The board said the offer undervalues the company and is not in the interests of the shareholders.

Xerox offered $22 per share, consisting of 77% in cash and 23% in Xerox stock, representing a total value of $33.5 billion.

HP Plans to Downsize and Cut Costs

In October 2019, HP announced a fiscal-year 2020 restructuring plan to simplify its operating model and become a more digitally enabled company. The restructuring aims to save $1 billion annually by the end of fiscal 2022. In its response rejecting the offer, HP management cited its confidence in its strategy and ability to execute to continue driving sustainable long-term value.

HP’s Concerns Regarding Xerox’s Recent Struggles

HP management also noted Xerox’s declining revenues, noting concerns about the trajectory of the business and its future prospects. These concerns are exacerbated by the high amount of debt the acquisition would require, leaving the newly created company with a heavy debt load, and also that HP’s $29 billion market cap is more than three times that of Xerox.

 HP Open to Future Consideration

Despite rebuffing the offer, HP commented that it remains open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox. HP has asked Xerox for access to additional information to evaluate a potential future transaction.

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