HP board unanimously rejects Xerox’s takeover bid

Jim Young/Reuters

• HP's board of directors unanimously rejected Xerox's takeover offer in a Sunday letter, saying the bid "significantly undervalues HP" and isn't in shareholders' best interests.
• HP said it remains open to future transactions, but would first need to explore "achievable synergies" between the firms.
• Xerox shares fell as much as 3.1% in early Monday trading. HP stock dropped as much as 2%.
• Watch HP trade live here.
• Watch Xerox trade live here.

HP's board of directors reviewed and unanimously rejected a takeover bid from Xerox, HP said in a Sunday letter.

The offer "significantly undervalues HP" and isn't in shareholders' best interests, the directors wrote. The computer company's board also expressed concern about the lack of due diligence on Xerox's financials, saying that "the potential impact of outsized debt" could devalue the merged company.

Xerox shares fell as much as 3.1% in early Monday trading. HP shares dropped as much as 2%.

HP remains open to future partnership and the possibility of evaluating a smaller transaction, according to the letter. The board deemed it "critical" to explore "achievable synergies" between the firms, and called on Xerox to assist in due diligence.

"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," the letter signed by HP CEO Enrique Lores and Board Chairman Chip Bergh said.

Xerox extended a $33.5 billion takeover offer to HP on November 5, offering a mix of stock and cash for the blockbuster acquisition. The bid represented a 20% premium to Xerox stock's November 5 closing price, and boasted that cost synergies would bring at least $2 billion in savings within two years.

"Our Board of Directors strongly believes the industry is overdue for consolidation and that those who move first will have a distinct advantage in a secularly declining macro environment," Xerox CEO John Visentin wrote in the November 5 letter.

The chief executive added that a combined firm could take a leadership role in new businesses including 3D printing, graphics, and workflow software.

Both firms are in the process of boosting profits by cutting expenses. HP announced a restructuring plan in early October that included slashing up to 9,000 workers and shifting focus toward printer sales from ink refills. Xerox began its own cost-cutting initiative in 2019, with Visentin saying in an October 29 analyst call that increased cash flow would help the company in future acquisitions.

Xerox stock closed at $38.94 per share Friday, up roughly 93% year-to-date.

HP stock closed at $20.18 per share Friday, down about 1% year-t0-date.

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