Last week Xerox had threatened to take its $33.5bn (£26bn) takeover offer directly to HP’s shareholders if the HP board did not respond to its offer by 5pm today.
Yesterday (24 November), HP chief executive Enrique Lores and chairman Chip Bergh sent a letter to Xerox CEO John Visentin reiterating the HP board’s rejection of Xerox’s proposal “as it significantly undervalues HP” and is “highly conditional and uncertain”.
The letter also called into question Xerox’s own performance.
“We remain prepared to study the potential value of a combination and to work quickly to learn more about your business trajectory. However, there are significant concerns about both the near-term health and long-term viability of your business that have a significant impact on Xerox’s value,” the letter stated.
“It is clear in your aggressive words and actions that Xerox is intent on forcing a potential combination on opportunistic terms and without providing adequate information.”
HP said it had concerns that the end of Xerox’s involvement with the Fuji Xerox joint venture had “left a sizeable strategic hole” in Xerox’s portfolio.
“It appears to us that when Xerox exited the Fujifilm joint venture, Xerox essentially mortgaged its future for a short-term cash infusion. We fear that the exit has left a sizeable strategic hole in Xerox’s portfolio.
“In addition, we have concerns as to the state of Xerox’s technology resources, research and development pipeline, future product programs, and supply continuity and capability. Finally, we note that Xerox will have to get access to the fastest growing Asia Pacific region.”
HP said Xerox’s sales were falling, and raised concerns about a lack of visibility about the decline in the key metric of customer Total Contract Value.
It also queried the extent of the likely cost savings, which Xerox had said could be as much as $2bn.
“Our review of synergies based on public information and the limited information you have shared does not support achievable synergies of the scale you suggest, and it appears that your assumptions include significant savings that are already included in each company’s independently announced cost reduction plans,” HP stated.
Xerox has proposed a $22-a-share (£16.97) takeover deal, of which $17 would be in cash, for the much larger HP business at the beginning of November. The total deal value was approximately $33.5bn and HP shareholders would own 48% of the combined entity.
Separately, Xerox is in the process of closing down its global Inkjet Innovation Centre at the former Impika operation in the South of France. Xerox acquired Impika in 2013 and the centre of excellence at its Aubagne site was inaugurated by then-Xerox CEO Ursula Burns in the summer of 2015.
Local newspaper La Provence said that around 140 jobs would go and attempts to sell the facility – required under French law and with Kyocera and EFI named as possible purchasers – had proved unsuccessful.