It started out as a takeover bid valued at $33bn, and now Xerox has said it has secured funding of $24bn to acquire rival printer manufacturer HP Inc.
Xerox announced it had secured binding financing commitments from Citi, Mizuho and Bank of America to fund what it described as a “value-creating combination with HP”.
In a letter to HP Inc’s board, Xerox CEO John Visentin wrote: “Over the last several weeks, we have engaged in constructive dialogue with many of your largest shareholders regarding the strategic benefits of our proposal to acquire HP. It remains clear to all of us that bringing our companies together would deliver substantial synergies and meaningfully enhanced cashflow that could, in turn, enable increased investments in innovation and greater returns to shareholders.”
HP had previously suggested that Xerox would be unable to fund the proposed acquisition, but Visentin wrote: “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 from Citi, Mizuho and Bank of America. My offer stands to meet with you in person, with or without your advisers, to begin negotiating this transaction.”
Following Xerox’s original bid at the start of November, HP questioned the viability of Xerox’s business and whether combining the two businesses would lead to cost savings. Responding to Visentin’s original offer, the HP Inc board stated: “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.”
At the start of December, activist investor Carl Icahn wrote an open letter urging HP Inc to pursue negotiations with Xerox. He stated: “I cannot believe that the recalcitrance of HP’s board is driven by any real confidence in its standalone restructuring plan, which the market, shareholders and analysts met with extreme indifference and which seems to amount to little more than rearranging the deckchairs on the Titanic.
“The road to the graveyard on Wall Street is littered with the bones of companies, such as Eastman Kodak, which wasted a great deal of valuable time by coming up with one ill-fated plan after another and also failed to act decisively when transformative opportunities presented themselves.
“It is absurd for the HP board and management team, with such a history of underperformance and missteps, to claim to have had a sudden epiphany and now expect shareholders to trust them to execute a standalone restructuring plan rather than to even explore an opportunity to enter into a combination that could bring about a much-needed $2bn-plus of cost synergies and possibly save the company.”
But now Icahn’s involvement in the Xerox/HP Inc deal is also under the spotlight, following a lawsuit brought against him from an institutional investor that own HP Inc shares, alleging insider trading. On 13 December, Bloomberg reported that the Miami Firefighters Relief and Pension Fund had filed a lawsuit claiming that Icahn’s business bought shares in HP Inc in the knowledge that Xerox would be putting in a bid for the company.
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