HP's board of directors has overwhelmingly dismissed the takeover bid of Xerox Holdings Corp., stating that the $22 per share offer is too weak, citing concerns about the prospects of the smaller competitor in the printing industry.
In a letter to Xerox chief executive officer John Visentin, HP said it is "open to exploring" a partnership but there are "fundamental issues that need to be discussed," chief executive Enrique Lores and chairman Chip Bergh wrote, citing the drop in sales from Xerox after June 2018, "that poses important questions about your market path and prospects for us."
As a move towards any possible merger that would combine legendary labels and reshape the publishing business, HP pushed for exposure to Xerox's books.
Xerox, headquartered in Norwalk, Connecticut, is one of the biggest suppliers of photocopiers, while the Palo Alto, CA-basedd HP is one of the main printer manufacturers in the world. A Xerox spokesperson was not immediately available for comment.
"With significant Xerox involvement and exposure to diligence data, we feel we can rapidly determine the viability of a possible deal," wrote Lores and Bergh.
HP officials believe they will move quickly on due diligence because the two firms have had on and off discussions over the years and have even demanded such a test in September this year for a possible company merger, according to people familiar with the situation.
HP officials are open to any sort of deal that would generate the most shareholder value and might consider buying Xerox, the people said.
HP's announcement included a letter from Xerox dated November 5 detailing the bid of $17 a share in money and 0.137 Xerox stock per share of HP, for a total transaction price of $33.5 billion. The letter from Xerox confirmed that the bid remained open until 13 November.
Stocks of HP have risen 9.8 percent to $20.18 since the talks on Nov. 5, granting it a $29.9 billion market capitalization. Xerox has risen to $38.94, about 7.1 percent for an $8.42 billion market cap.
A mix has been sponsored by shareholder Carl Icahn, who increased his interest in HP last week to 4.2 percent of outstanding shares in the third quarter.
In an interview with the Wall Street Journal last week, Icahn said he sees HP as undervalued and that both firms will greatly benefit from cost savings and other expenses from merging them. A spokeswoman of Icahn was not immediately available for comment on Sunday.
