Multinational IT company HP has rebuffed a takeover bid by Xerox, saying the deal is not in the interest of its shareholders.
The HP board announced on Monday that after consultation with its independent financial and legal advisors, a decision was reached to decline Xerox’s unsolicited offer.
For months, the two companies have been playing a cat-and-mouse game, with Xerox aggressively pushing for a takeover, which the HP board has been reluctant to accept.
HP previously accused the document management technology firm of overstating synergies, although it believed there was merit in industry consolidation.
Yesterday, in a statement, HP said it unanimously recommends its shareholders reject the offer and not tender their HP shares pursuant to the offer.
Chip Bergh, chairman of HP’s board of directors, said: “Our message to HP shareholders is clear: the Xerox offer undervalues HP and disproportionately benefits Xerox shareholders at the expense of HP shareholders.
“The Xerox offer would leave our shareholders with an investment in a combined company that is burdened with an irresponsible level of debt and which would subsequently require unrealistic, unachievable synergies that would jeopardise the entire company.”
One of the reasons HP rejected the bid is that the Xerox offer, in effect, offers shareholders “something they already own, and would disproportionately benefit Xerox shareholders relative to HP shareholders”.
The board also said the Xerox offer would use HP’s balance sheet as transaction consideration for the benefit of Xerox shareholders.
Furthermore, it said Xerox’s offer meaningfully undervalues HP by failing to reflect the full value of HP’s assets and its standalone strategic and financial value creation plan.
"At HP, we’re creating value, not risk,” said Enrique Lores, HP president and CEO. "HP is a trusted brand with a strong track record of value creation and we’re executing a clear plan that will drive significant earnings growth. We’re well positioned in our categories, aggressively attacking costs and pursuing the most value-creating path for our shareholders."
Since the beginning of the year, Xerox has been playing a high-stakes game, threatening to replace HP's entire board, upping the stakes in its bid to control the company. HP has twice rejected the bids.
Three weeks ago, the document management technology company increased its offer price for HP to R359 ($24) per share.
Xerox had initially offered HP $22 per share. The bid consisted of 77% in cash and 23% in stock, or $17 in cash and 0.137 Xerox share for each HP share.
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