HP Inc (HPQ) warned shareholders that advancing Xerox’s proposed tender offer could be “disastrous” during the current global coronavirus pandemic.
HP said that Xerox’s offer would burden the company with a debt level that could potentially threaten its cash needs. Earlier this month, Xerox made an offer to buy HP.
“Any complex, large-scale, highly leveraged transaction in the current economic environment could be disastrous for HP,” the company said in a letter to shareholders. “While we remain open-minded about M&A as a tool to add value for HP - it’s abundantly clear that now is not that time.”
HP raised concerns that the “highly leveraged capital structure” Xerox is proposing could threaten the company’s stability.
The analyst community is taking a cautious stance on recommending to buy HP stock. The Moderate Buy consensus rating splits into 3 Buys and 4 Holds. The average price target of $23 suggests a potential gain of 33% in the coming 12 months. (See HP’s stock analysis on TipRanks)
Looking ahead, HP said it will focus on core businesses and new industries with breakthrough innovation, while significantly reducing costs.
“We have a healthy cash position and balance sheet that helps us to navigate unanticipated challenges such as the crisis now before us,” HP said in the letter.