HP’s board of directors has reportedly rejected a bid by Xerox to take over the company.
Earlier this month, HP issued a statement saying it was engaged with Xerox over a $27 billion takeover bid.
However, CNBC reports that HP’s board of directors said Sunday that they unanimously rejected a proposal from Xerox to acquire the company, because the offer is not in the best interest of shareholders and would undervalue HP.
Xerox had offered HP $22 per share in its takeover bid for the company. The bid consisted of 77% cash and 23% stock, or $17 in cash and 0.137 Xerox share for each HP share, says CNBC.
“In reaching this determination, the board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company’s stock,” the board wrote in a letter to John Visentin, Xerox’s CEO, according to the report.
HP has struggled to find a viable model to move beyond its profitable printing business as customers shift toward digitisation.
Last month, HP posted its fiscal 2020 financial outlook and restructuring strategy, announcing plans to cut up to 9 000 jobs globally in the next three years.
The company estimates it will incur total labour and non-labour costs of approximately $1 billion in connection with the restructuring and other charges, with about $100 million in fiscal Q4 of 2019, $500 million in fiscal 2020 and the rest split between fiscal 2021 and 2022.
These actions are expected to be completed in fiscal 2022 and are estimated to result in annualised gross run rate savings of about $1 billion by the end of fiscal 2022.
“We note the decline of Xerox’s revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects,” the board wrote, according to CNBC.
“In addition, we believe it is critical to engage in a rigorous analysis of the achievable synergies from a potential combination,” the board wrote. “With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction.”
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