HP unanimously rejects Xerox’s official tender.
Last week, Xerox officially launched a tender offer HP’s outstanding shares at $24 per share.
HP’s board has already returned with its unanimous recommendation to shareholders to not tender shares in the Xerox offer. HP returned with the recommendation in three days, initially asking for 10 working days to review the offer.
In the statement, HP included a list of 15 reasons why the partnership with Xerox would not work out as it is. The prevailing reason is that the offer undervalues HP.
The full list of reasons for HP’s recommendation:
The Xerox Offer, in effect, principally offers HP shareholders something they already own, and would disproportionately benefit Xerox shareholders relative to HP shareholders.
The Xerox Offer would use HP’s balance sheet as transaction consideration for the benefit of Xerox shareholders.
The Xerox Offer meaningfully undervalues HP by failing to reflect the full value of HP’s assets and its standalone strategic and financial value creation plan.
HP has a track record of execution that has resulted in strong, consistent operational and financial performance.
The HP Board believes that HP’s standalone plan has positioned HP for significant value creation.
HP’s strong balance sheet and financial flexibility provide multiple levers for value creation.
The HP Board believes that the Xerox Offer would compromise the future of HP and the value of shares of HP common stock by transferring value to Xerox shareholders and leaving HP shareholders with an investment in a combined company with an irresponsible capital structure, premised on unrealistic synergies estimates.
HP believes that Xerox’s “synergy” estimates, including cost cuts, exceed reasonably achievable levels.
The Xerox Offer includes a significant equity component, the value of which the HP Board believes would be subject to significant risks and uncertainties.
Xerox does not have experience operating businesses in the sectors in which HP operates, including within Personal Systems, Home Printing, and 3D and Digital Manufacturing.
Xerox has been experiencing declining sales and its recent sale of its interest in the Fuji-Xerox joint venture raises significant concerns about its future position.
HP believes that Xerox’s cost-cutting has come at the expense of long-term value creation, and Xerox has demonstrated a lack of focus on research and development.
The quantity and nature of the conditions of the Xerox Offer create significant uncertainty and risk.
The HP Board believes that Xerox’s urgency in launching the Offer, while simultaneously running a full slate of director nominees for election at HP’s 2020 Annual Meeting of Shareholders, evidences Xerox’s desperation to acquire HP to address its continued business decline.
The HP Board has received an inadequacy opinion from each of Goldman Sachs & Co. LLC (“Goldman Sachs”) and Guggenheim Securities, LLC (“Guggenheim Securities”) to the effect that, as of March 3, 2020, and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken set forth in their respective written opinions, the consideration proposed to be paid to the holders (other than Xerox and any of its affiliates) of shares of HP common stock pursuant to the Xerox Offer was inadequate from a financial point of view to such holders.
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