Xerox has acquired $24 billion funding to proceed with its proposal to acquire IT giant Hewlett Packard (HP).
The company is now bullish on merging the two companies and is going forward with its $33 billion offer for the acquisition.
In a letter to Chip Bergh (HP's Chairman of the Board) and Enrique Lores (HP's CEO), Xerox's CEO, John Visentinin had addressed the company’s capital-related concerns that lead to HP rejecting Xerox’s earlier offer made in November by mentioning said funding.
"We have always maintained that our proposal is not subject to a financing contingency, but in order to remove any doubt, we have obtained binding financing commitments (that are not subject to any due diligence condition) from Citi, Mizuho and Bank of America,” Visentin said.
The letter also stated that Xerox is now planning on appealing directly to HP stakeholders, pressuring them to act on the proposed deal.
The merger also has strong support from HP’s fifth largest stakeholder and investor Carl Icahn who owns a 10.85 per cent controlling stake in Xerox and had recently acquired a 4.24 per cent stake in HP.
Plans post the merger
Xerox would utilise its strategic plans post the merger to build $2 billion synergies that will provide 60 per cent more equity to the share holders than HP’s current stand alone plans as per an investor presentation by Visentin.
The presentation also countered HP’s plans for restructuring by the end of fiscal year 2022 by laying off 7000-9000 employees with an estimated savings of $1 billion a year.
Xerox has an entirely different approach towards restructuring, with its primary focus on operations and cash flows, thereby saving $1 for every $1 spent.
The merger could have significant impact on both companies if the much larger HP’s stakeholders chose to go forth with the deal, according to experts.
The role of Xerox’s financial adviser during the merger has been taken over by Citi while its legal counsel include King & Spalding LLP, Simpson Thacher & Bartlett LLP and Cravath, Swaine & Moore LLP.
Xerox’s stock was down 1.5 per cent on Monday while HP’s stock rose by 0.6 per cent.
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