Xerox goes on the road with HP proposal

Jo Francis
Tuesday, December 10, 2019

Xerox CEO John Visentin is meeting with HP shareholders this week as the manufacturer pitches the perceived benefits of its takeover plan.

Xerox proposal focuses on cost synergies and revenue synergies
Xerox proposal focuses on cost synergies and revenue synergies

After HP rejected its proposals Xerox went hostile with its takeover bid at the end of last month, and said it would take its offer directly to HP’s shareholders.

The $33bn (£26bn) proposal is for $22 a share, of which $17 would be in cash.

Xerox has now filed an investor presentation laying out its plans for the mega-merger, and the synergies it claims would be generated.

Visentin stated: “In this presentation, we provide an overview of the value of our offer and two of the most important opportunities created by a combination – cost synergies and revenue synergies.

“By harvesting these synergies, which can only be realized with this combination, the new proforma company will be both more profitable and better positioned to provide customers with a stronger mix of products, services and support than either company can do on its own.”

He said the value of the transaction “goes beyond economics” and could “put these storied brands at the forefront for decades to come”.

“In consolidating industries, first movers not only win but also have an opportunity to reshape the competitive landscape in an enduring way,” he stated.

In the presentation Xerox states that it has successfully achieved nearly $1bn in cost savings on sales of $9bn in 18 months through its ‘Project Own It’ initiative, with every $1 of savings costing $0.35 to achieve.

By contrast, Xerox claimed that HP’s own cost-saving plans to deliver $1bn of savings over three years on sales of $58.5bn would cost $1 for every dollar saved. 

As well as cost saving synergies of $2bn, the document outlines ‘attach opportunities’ to sell Xerox software to HP’s customer base, including XMPie and FreeFlow  to an estimated 10,000 HP Indigo customers, and 50,000 wide-format printer users.

Xerox also said that the combined product portfolio in toner and inkjet printing, including products for the $95bn production printing market, would result in “the most complete and competitive portfolio across all segments”.

It claimed HP was missing out on high-margin, recurring revenue by not having its own financing business.

HP had not responded at the time of writing.

The top five shareholders in HP are: Vanguard Group (8.54%), Dodge & Cox (8.03%), SSGA Funds Management (4.86%), BlackRock Fund Advisors (4.66%), and Icahn Associates (4.25%).

Xerox concluded by urging HP to engage with Xerox and conduct three weeks of mutual due diligence.

The presentation can be viewed here.


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