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Ink spat as Xerox gets aggressive and HP Inc questions strategy

Letters have been flying between the HP Inc board of directors and Xerox, with Xerox planning to pitch directly to shareholders

HP Inc has responded to Xerox’s follow-up acquisition proposal, describing the letter from its CEO John Visentin as “aggressive”, and questioning the viability of Xerox’s business.

On 21 November, Visentin responded to HP Inc’s original rejection of Xerox’s $30bn acquisition offer with a letter stating: “We were very surprised that HP’s board of directors summarily rejected our compelling proposal to acquire HP for $22 per share, claiming our offer ‘significantly undervalues’ HP.

“Frankly, we are confused by this reasoning. Your response lacks a clear path forward. You have requested customary due diligence, which we have accepted, but you have refused to agree to corresponding due diligence for Xerox.

“Xerox is determined to capture the compelling opportunity for our respective shareholders and strongly encourages HP’s board of directors not to sanction further delay in light of our extensive discussions to date.”

Visentin said the Xerox board of directors would “expeditiously pursue the proposed acquisition of HP”.

In the letter, Visentin said that HP Inc had until 5:00pm EST on 25 November, 2019 to respond, otherwise Xerox would put the acquisition offer direct to HP Inc shareholders.

HP Inc’s board of directors responded on 24 November, stating: “We reiterate that we reject Xerox’s proposal as it significantly undervalues HP. Additionally, it is highly conditional and uncertain. Consequently, your proposal does not constitute a basis for due diligence or negotiation.”

In the letter, the HP Inc board accused Visentin of using “aggressive words” to force a potential combination of the two companies. HP Inc also questioned the viability of HP Inc’s business.

“There are significant concerns about both the near-term health and long-term viability of your business that have a significant impact on Xerox’s value. The question of whether there is a path to turn around your business is a threshold issue,” the HP inc board of directors wrote.

“We remain prepared to study the potential value of a combination and to work quickly to learn more about your business trajectory.

“However, there are significant concerns about both the near-term health and long-term viability of your business that have a significant impact on Xerox’s value. The question of whether there is a path to turn around your business is a threshold issue,” HP Inc said.

HP Inc’s questioned whether the acquisition would lead to savings, stating: “Our review of synergies based on public information and the limited information you have shared does not support achievable synergies of the scale you suggest, and it appears that your assumptions include significant savings that are already included in each company’s independently announced cost reduction plans.” 

The HP Inc directors went on to question Xerox’s business strategy. “It appears to us that when Xerox exited the Fujifilm joint venture, Xerox essentially mortgaged its future for a short-term cash infusion,” the HP inc board of directors’ letter stated.

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