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Xerox gets ready to cut and paste HP Inc board

Xerox plans to pay HP Inc shareholders $17 per share in cash and nominate a new HP Inc board, specialising in business transformation

John Visentin, the CEO of Xerox, has met with some HP shareholders to walk them through the company’s case for Xerox’s proposed acquisition of HP Inc

In a presentation to shareholders, he stated HP Inc shareholders would receive $17 in cash for each share they hold. “The logic behind this combination is undisputed,” the Xerox presentation to shareholders stated. “The increased cash flow generated would help pare debt, increase capital returns to shareholders and drive greater investment in innovation that would put these storied brands at the forefront for decades to come.”

In the presentation, Visentin claimed Xerox had a fundamentally different approach to restructuring that focuses on operations and cash flow, not headcount. “HP’s approach will have them spending $1 of cash for every $1 of savings and does nothing to streamline their operations for the future,” the Xerox presentation stated.

Interestingly, Xerox has specified how it plans to achieve the $2bn of savings the combined company would achieve. There is likely to be a cull of products, with a stated 20% reduction in stock taking units (SKUs), according to Xerox’s plans for consolidating the two businesses.

It hopes it can achieve savings of 30% by removing duplicate operations and 30% by cutting duplicate delivery options. IT spending could also be reduced from 2% of revenue to 1.5% of revenue. According to Xerox, the acquisition would generate nearly 60% more equity value than HP’s standalone plan would for their shareholders.

Xerox said it also plans to put forward “a full slate of directors” for election at HP’s 2020 annual meeting. Those to be nominated include former senior executives from several blue chip companies, including Aetna, United Airlines, Hilton Hotels, Novartis, Verizon and more. Xerox said the candidates were chosen because of their expertise in overseeing and executing significant company transformations and combinations, with demonstrated track records of creating value for shareholders.

“HP shareholders have told us they believe our acquisition proposal will bring tremendous value, which is why we lined up $24bn in binding financing commitments and a slate of highly qualified director candidates,” said Visentin. “We believe HP shareholders will be better served by a new slate of independent directors who understand the challenges of operating a global enterprise and appreciate the value that can be created by realising the synergies of a combination with Xerox.”

HP Inc has issued a statement following this latest turn of events at Xerox, in which it says the company is “significantly undervalued”.

“These nominations are a self-serving tactic by Xerox to advance its proposal, which significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders,” the company stated.

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