John Visentin is nothing if not persistent.
The CEO of Norwalk, Connecticut-based Xerox has sweetened the pot, announcing on Monday that the company would increase its bid to acquire fellow OEM heavyweight HP for roughly $34 billion, or $24 per share, an increase of $500 million above its initial offer. In a release, the company said it would launch the tender offer on or around March 2 for all of the outstanding shares of HP’s common stock.
The offer’s breakdown is $18.40 in cash and 0.149 Xerox shares for each HP share. The proposal, which represents a $2 increase per share over the original offer—made last November and repeatedly rejected by HP—is not subject to financing conditions or due diligence. According to Xerox, the $24 offer represents a 41% premium to HP’s unaffected 30-day volume weighted average trading price of $17.
On Tuesday, HP said it would respond to Xerox’s tender offer during its Feb. 24 quarterly earnings conference call. “HP will share additional information about its plan to drive sustainable long-term value for its shareholders, including through the execution of the company’s multi-year strategic and financial plan and the deployment of its strong balance sheet,” the company said in a release.
“HP wants its shareholders to have full information on the company’s earnings and the value inherent in the company before responding to Xerox’s February 10 press release.”
Raising Stakes
The new Xerox offer appears to respond to HP’s latest refusal, in which the company said the $33.5 billion initial proposal significantly undervalues HP. That HP is withholding a response to the new offer until shareholders have a firm grasp on the company’s earnings and value seems a pre-emptive case build as to why this new offer also falls short of addressing HP’s value.
Palo Alto, California-based HP has ample reason to carefully measure its response in tandem with its latest financials, given that Xerox recently launched a hostile takeover attempt. Late last month, Xerox nominated a new slate of 11 candidates for HP’s board of directors, setting the stage for a proxy battle.
This latest proposal, Xerox believes, speaks to the feedback it has received from HP shareholders. “These stockholders consistently state that they want the enhanced returns, improved growth prospects and best-in-class human capital that will result from a combination of Xerox and HP,” the release continued. “The tender offer announced today will enable these stockholders to accept Xerox’s compelling offer despite HP’s consistent refusal to pursue the opportunity.”
Just before last Christmas, Visentin took his case to HP’s shareholders via a 33-page presentation outlining the strengths of a combination, including more than $2 billion in cost reductions. Also stoking the fires is billionaire shareholder Carl Icahn—HP’s fifth-largest shareholder and the holder of an 11% stake in Xerox—who has urged HP shareholders to push for the deal. HP has accused Icahn for being a driving force behind the proposals and the hostile tone the merger attempt has developed.
Monday’s missive also underscored the immediate value created through a union of the companies. “The value created by the synergies realized in a combination of Xerox and HP is incremental to any value that HP can create by revising its strategic plan or dramatically changing its capital allocation policy to incorporate additional share repurchases. Xerox’s offer provides HP stockholders with both significant, immediate cash value, and meaningful upside via equity ownership in the combined company.”
Xerox has also created a website dedicated to providing news and information regarding its push to acquire HP.
