After Hewlett-Packard rejected its takeover bid twice already, Xerox Holdings Corp has decided to escalate its push to merge the two companies by going directly to HP's shareholders. Xerox announced this week that it plans to approach HP's shareholders to present their case for the proposed merger.
Xerox stated in a letter sent to HP's board of directors on Tuesday that its "aggressive" approach in pushing for a merger is also fitting given that it had already been rejected twice before. Xerox mentioned in the letter that the board's continued refusal to engage in mutual due diligence "defies logic," which is the very reason why it has resorted to such actions.
Xerox plans to go over the company's board and solicit support directly from its shareholders. The Connecticut-based print and digital documents products and services provider hopes that HP's shareholders will be able to convince the company's board to accept its takeover offer. Xerox claims that its current offer does provide a very "compelling opportunity" for the company as a whole.
The exact method it will employ to force a merger has yet to be specified, but Xerox does have a couple of options under its belt. The company can choose to engage in a hostile takeover through a tender offer. It may also engage in a proxy fight, involving the forced nomination of new directors.
Since negotiations began for a possible merger, both companies have been in dispute over due diligence. HP previously stated that it was open to discussing a possible merger but only if it can conduct due diligence on Xerox. An agreement to conduct "mutual confirmatory due diligence" was established, but the deal officially expired on Monday this week.
Prior to the deadline, HP had expressed concerns over the health of Xerox's business stating that it likely doesn't have the resources or funding necessary for its planned acquisition. HP stated in a letter over the weekend that Xerox likely wants to force a merger on "opportunistic terms," as evident in its refusal to provide adequate information.
Hp further pointed out that Xerox's intent to force a merger along with its unnecessary urgency has only managed to increase its concern over its business performance and prospects.
In its last rejection, HP's board voted unanimously to reject Xerox's cash and stock takeover bid valued at around $33 billion. The board claimed that the decision was made based on its concerns on Xerox's business prospects and the fact that it is currently carrying too much debt.
