HP has hit back at Xerox, saying its proposal to take over the company is fundamentally flawed and is overstating synergies.
HP says in a statement it believes there is merit in industry consolidation; however, the tie-up must benefit its shareholders.
“The revised Xerox proposal, announced on February 10, 2020, meaningfully undervalues HP, creates significant risk, and compromises HP’s future.”
Meanwhile, printer maker Xerox said HP directors had adopted a “poison pill” as they opposed its bid to take control of the company.
Since the beginning of the year, Xerox has been playing a high-stakes game, threatening to replace HP's entire board at this Monday’s meeting and upping the stakes in its bid to control the company. HP has twice rejected the bids.
Just over a fortnight ago, the document management technology company increased its offer price for HP to R359 ($24) per share.
However, yesterday HP responded saying the revised Xerox proposal “exchanges HP stock for cash and Xerox stock at a fundamentally flawed value exchange that does not compensate HP shareholders for the value of HP executing on its strategic plan and transfers value from HP shareholders to Xerox shareholders”.
HP says the proposal “uses HP’s balance sheet as transaction consideration and creates an irresponsible capital structure that would jeopardise the future value of the combined company and constrain its ability to invest in growth and innovation”.
Moreover, HP says the Xerox proposal “overstates the potential synergies by including HP’s existing plans for independent cost reductions and productivity gains.
“HP is reaching out to Xerox to explore if there is a combination that creates value for HP shareholders that is additive to HP’s strategic and financial plan. HP’s Board of Directors is committed to pursuing the most value-creating path and to serving HP shareholders’ best interests.”
Xerox had initially offered HP $22 per share. The bid consisted of 77% in cash and 23% in stock, or $17 in cash and 0.137 Xerox share for each HP share.
In a statement last week, the company fired warning shots to HP directors signalling that it is still fighting to take control of the company.
“The HP board clearly adopted a poison pill because our offer is receiving overwhelming support from their shareholders. Regardless of what the company and its army of advisors announce Monday, we believe HP shareholders appreciate that the value we could create by combining Xerox and HP outweighs – and is incremental to – anything HP could achieve on its own,” reads Xerox’s statement.
It adds: “Despite the HP board’s intention to deny shareholders the chance to choose for themselves, we will press ahead with our previously announced tender offer and electing our slate of highly qualified director candidates.”
The Wall Street Journal reports that Xerox bought a small stake in HP in recent weeks. The stake would give Xerox the right to nominate directors for elections to be held at HP’s annual meeting.
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