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Xerox Starts Tender Offer in Hostile Takeover Bid for HP

Nico Grant

(Bloomberg) -- Xerox Holdings Corp. has started a tender offer for all outstanding shares of HP Inc., escalating a battle for control of the personal computer giant that Xerox executives began considering almost 10 months ago.

Xerox has pitched HP investors on a cash-and-stock offer worth $24 a share. For each HP share, a holder would receive $18.40 in cash and 0.149 Xerox shares. The offer is set to expire April 21, Norwalk, Connecticut-based Xerox said Monday in a statement.

The photocopying pioneer has said combining the companies would yield $2 billion in cost savings and more than $1 billion in additional revenue growth. Both hardware companies invented technologies still in use by consumers and office workers, and have struggled in a world increasingly driven by software.

HP’s board has rejected Xerox’s offer as undervaluing the Palo Alto, California-based company, and said last week it will return $16 billion to shareholders in an effort to show it can stand on its own. HP executives, however, said they will engage Xerox to discuss a potential combination on their terms.

“Our proposal offers progress over entrenchment,” Xerox Chief Executive Officer John Visentin said in the statement. “HP shareholders will receive $27 billion in immediate, upfront cash while retaining significant, long-term upside through equity ownership in a combined company with greater free cash flow to invest in growth and return to shareholders.”

On Monday, HP said in a statement that it will review Xerox’s offer over 10 business days before advising the best course of action for shareholders.

Xerox executives first contemplated an acquisition of HP in May 2019, the company said in a regulatory filing. After acquiring a 4% stake in HP, Xerox’s largest shareholder, activist Carl Icahn, called Visentin and HP’s then-CEO on Aug. 12 to say that a merger of the companies would create value.

Executives from Xerox and HP met Sept. 12 to discuss due diligence. The HP officials “indicated they had reservations about” a deal with Xerox because of challenges integrating the Samsung print business that HP bought in 2017, limitations on HP conducting business in China and undisclosed restrictions contained in HP’s agreements with Canon Inc.

HP sent Xerox a long list of questions, including requests for information that Xerox found “competitively sensitive.” Xerox refused to answer them without a confidentiality agreement and mutual due diligence. Xerox’s board decided executives shouldn’t engage in discussions with HP or open the company’s books unless the PC maker proposed a deal structure or gave Xerox access for due diligence. Instead, the printing company redoubled efforts to put together an offer to buy HP, which it sent Nov. 5.

Xerox said it has secured financing from Citigroup Inc., Mizuho Financial Group Inc., Bank of America Corp., Mitsubishi UFJ Financial Group Inc., PNC Bank, Credit Agricole, Truist Financial Corp. and SunTrust Robinson Humphrey Inc. for the cash portion.

(Updates with details on the background of the deal starting in the seventh paragraph.)

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Andrew Martin

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