Xerox increases offer in HP takeover bid

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Document management technology company Xerox has increased its offer price for HP to R359 ($24) per share.

Xerox announced yesterday its intention to present the enhanced offer on or around 2 March, for all HP shares of common stock of HP, which will comprise $18.40 in cash and 0.149 Xerox shares for each HP share.

The company said the offer will not be subject to any conditions related to financing or due diligence.

Xerox has been aggressively trying to take control of HP, even threatening to replace HP's entire board. HP has twice rejected Xerox’s attempts.

Initially, HP’s board of directors rejected Xerox’s bid in November last year, but the latter is still pushing for the two parties to go back to the discussion table.

Xerox had initially offered HP $22 per share. The bid consisted of 77% in cash and 23% stock, or $17 in cash and 0.137 Xerox share for each HP share.

In a statement on Monday, Xerox said it had met, in some cases multiple times, with many of HP’s largest stockholders.

“These stockholders consistently state they want the enhanced returns, improved growth prospects and best-in-class human capital that will result from a combination of Xerox and HP. The tender offer announced today will enable these stockholders to accept Xerox’s compelling offer despite HP’s consistent refusal to pursue the opportunity,” it said.

Additionally, it said the value created by the synergies realised in a combination of Xerox and HP is incremental to any value that HP can create by revising its strategic plan or dramatically changing its capital allocation policy to incorporate additional share repurchases.

“Xerox’s offer provides HP stockholders with both significant, immediate cash value, and meaningful upside via equity ownership in the combined company. The headline offer price of $24 per share represents a 41% premium to HP’s unaffected 30-day volume weighted average trading price of $17.

“The implied offer value of $33 per share represents a 94% premium to HP’s unaffected 30-day volume weighted average trading price of $17.”

HP, one of the world's largest computer and electronics companies, has been struggling to find a viable model to move beyond its profitable printing business as customers shift toward digitisation.

In October, HP posted its fiscal 2020 financial outlook and restructuring strategy, announcing plans to cut up to 9 000 jobs globally in the next three years.

The company estimates it will incur total labour and non-labour costs of approximately $1 billion in connection with the restructuring and other charges, with about $100 million in fiscal Q4 of 2019, $500 million in fiscal 2020, and the rest split between fiscal 2021 and 2022.

These actions are expected to be completed in fiscal 2022 and are estimated to result in annualised gross run rate savings of about $1 billion by the end of fiscal 2022.

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