US printer maker Xerox Holdings Corporation carried out an aggressive attempt with a $24 per share bid to buy all outstanding stocks of rival HP. The proposition comprises $18.4 in cash and 0.149 shares for each HP share.
Xerox's proposition also came with a rebuttal to HP's account of why the company could not arrive at a deal. HP crafted a so-called "poison pill" last month to soften Xerox's hostile attempt.
Unless the two parties can reach an agreement, it will be Xerox's bid to revamp HP's board of directors at the latter's shareholder meeting set in the next few weeks -- rather than the tender proposal that will determine the result of the takeover dispute.
According to Xerox CEO John Visentin, the company's proposal offers "progress over entrenchment," adding that stakeholders of HP stand to get $27 billion in upfront cash while retaining a huge, long-term upside through equity shares in a merged entity with bigger free financial capability to invest.
HP last week disclosed that Xerox's bid has undervalued its operations, but that it may rethink other alternatives, including the possibility of HP taking full control of Xerox instead of the other way around. HP has a market value of almost $32 billion, four times bigger than Xerox.
The printing industry is in the doldrums as companies and customers turn to electronic documents to save money. This has put an extreme burden on printing manufacturers to consolidate and turn around profits decline through acquisitions that can improve market share. However, after nearly a year of on-off talks, Xerox and HP have been unable to steer clear of arguments.
Shares of HP settled 5.5 percent higher at $21.86 a share late Monday, increasing almost 12 percent from a year ago. Xerox's share price closed 4.07 percent higher as well at $33.51 per share, up 6.8 percent from a year ago. Both companies' stock rally came as the market recovered from a massive sell-off last week.
Xerox stated that it has secured financing from Citigroup C, Bank of America BAC, Mizuho Financial Group, Mitsubishi UFJ Financial Group, Credit Agricole, SunTrust Robinson Humphrey, Trust Financial and PNC Bank for the cash portion. HP said that it will review the offer over 10 business days before deciding a course of action for shareholders.
Xerox, whose $7 billion market value is one quarter the size of its rivals has emphasized it anticipates a merger to yield around $2 billion in cost synergies, although HP has claimed this number is too big. The two sides said they will focus on complementary segments of the printing market.
