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HP Inc attacks Xerox boardroom shakeup bid

Xerox wants to oust the HP Inc board, replacing it with directors who will push through its proposed acquisition

HP Inc has blasted Xerox’s latest move to initiate a hostile takeover bid, which involves replacing the existing board with 11 new members, claiming that Xerox’s tactics are self-serving.

The board nominations being proposed by Xerox include former senior executives from several blue chip companies, including Aetna, United Airlines, Hilton Hotels, Novartis and Verizon. 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.

Defending its existing board, HP Inc said: “We believe these nominations are a self-serving tactic by Xerox to advance its proposal, that significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders.” 

HP said its board had experience of developing and implementing cost-cutting plans to support both profitable growth and brand competitiveness in global markets in evaluating and executing strategic mergers and acquisitions. It said the current HP Inc board had also been involved in developing disruptive technology and driving innovation across the consumer and enterprise technology landscape.

Along with announcing that it would put forward “a full slate of directors” for election at HP’s 2020 annual meeting, Xerox has gone direct to HP Inc shareholders, offering $17 in cash for each share they hold. This sum is below the company's 52-week high of $24.09, as recorded on the financial blogging site Seeking Alpha, but only $1 above the 52-week low of $15.93.

HP previously stated that the $33bn proposed acquisition “seriously undervalues” the company. In a letter sent to Xerox on 6 January, it said: “We reiterate that the HP board of directors’ focus is on driving sustainable long-term value for HP shareholders. Your letter dated 6 January 2020 regarding financing does not address the key issue – that Xerox’s proposal significantly undervalues HP – and is not a basis for discussion. The HP board of directors remains committed to advancing the best interests of all HP shareholders and to pursuing the most value-creating opportunities.”

HP Inc responded to Xerox's attempt to circumvent the existing HP Inc board by stating: “Value creation for HP shareholders is not dependent on a Xerox combination. There are numerous opportunities available to HP to drive sustainable long-term value.” 

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HP also suggested that Xerox’s proposal and nominations were being driven by investor Carl Icahn. It claimed that Icahn’s large ownership position in Xerox means that his interests are not aligned with those of other HP shareholders.

It said: “Due to Mr Icahn’s ownership position, he would disproportionately benefit from an acquisition of HP by Xerox at a price that undervalues HP. Mr Icahn has meaningful influence over Xerox and its board of directors given this ownership position; the role he played in the appointment of Xerox’s current CEO, who is a former Icahn consultant; and the ties Mr Icahn has to members of the Xerox board, including Xerox’s chairman, an Icahn employee.”

Earlier this month, Xerox announced that 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”. The funding commitment has led to Xerox increasing pressure on HP Inc to negotiate.

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