Xerox ups offer for HP acquisition, raises deal amount to $34 billion

Hemani Sheth Mumbai | Updated on February 11, 2020

In a bid to address HP stakeholders’ ‘concerns’ over the deal, Xerox increases offer price to $24 per share

In a bid to further sweeten its acquisition deal for Hewlett Packard (HP), Xerox on Monday announced that it has raised its offer to $24 per share, the final deal amounting $34 billion.


The company is planning to launch a tender offer to acquire the IT giant in March.


“Xerox Holdings Corporation (NYSE: XRX) (“Xerox”) today announced its intention to launch a tender offer on or around March 2, 2020, for all of the outstanding shares of common stock of HP Inc. (NYSE: HPQ) (“HP”) at a price of $24.00 per share, which will be comprised of $18.40 in cash and 0.149 Xerox shares for each HP share,” Xerox said in an official press release.


Earlier offer


The company had launched an initial offer to acquire HP back in November 2019, with a share price of $22. The offer was, however, rejected by the tech giant on the grounds that the deal was not in the best interest of the stakeholders.


Xerox in January had announced that it had secured $24-billion funding to proceed with its acquisition deal. It had also said that it would be directly approaching the stakeholders with its renewed proposal.


Addressing HP stakeholders’ concerns


In a letter to HP board chairman Chip Bergh and CEO Enrique Lores, John Visentin, Xerox’s chief executive had addressed the concerns that led to HP rejecting its earlier offer made in November, by mentioning the secured 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.


According to the company’s official statement, Xerox believes that the current offer will persuade HP stakeholders to act on the proposed deal.


“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.


“The headline offer price of $24.00 per share represents a 41 per cent premium to HP’s unaffected 30-day volume weighted average trading price of $17.00. The implied offer value of ~$33 per share represents a 94 per cent premium to HP’s unaffected 30-day volume weighted average trading price of $17.00,” the company added.


Citi is acting as Xerox’s financial advisorfor the proposed deal. King & Spalding LLP is providing legal counsel to the company while Willkie Farr & Gallagher LLP is acting as legal counsel to Xerox’s independent directors. Moelis & Company is acting as financial advisor to Xerox’s independent directors.


Merger plans

Xerox is planning for the deal to act as a merger with HP. As per an investor presentation by Visentin, the company would utilise its strategic plans post the merger to build $2-billion synergies that will provide 60 per cent more equity to the shareholders than HP’s current stand-alone plans.


The deal is strongly backed by HP’s fifth-largest stakeholder and investor, Carl Icahn, who also owns a 10.85 per cent controlling stake in Xerox.


Published on February 11, 2020

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