Xerox plots bid for HP

By Jo Francis, Thursday 07 November 2019

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With the ink barely dry on Xerox’s deal with Fujifilm to settle the Fuji Xerox situation, speculation that the iGen manufacturer could be readying a bid for its larger printing industry rival HP has been confirmed.

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Could Xerox launch an audacious bid for HP?

The Wall Street Journal reported that Xerox has funding in place to launch a cash-and-shares bid for HP, and said the Xerox board discussed the possibility of a bid on Tuesday (5 November). 

Yesterday HP issued a statement confirming that an approach had been made, and also that the two firms had also talked about a possible coming together before. 

The statement said: “As reviewed at HP’s most recent Securities Analyst Meeting, we have great confidence in our multi-year strategy and our ability to position the company for continued success in an evolving industry, particularly given the multiple levers available to drive value creation.

“Against this backdrop, we have had conversations with Xerox Holdings Corporation from time to time about a potential business combination. We have considered, among other things, what would be required to merit a transaction. Most recently, we received a proposal transmitted yesterday.  

“We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye towards what is in the best interest of all our shareholders.”

Xerox investors Carl Icahn and Darwin Deason, who stymied last year's attempt to bring Fujifilm and Xerox together, are viewed as pulling the levers behind the deal. 

An industry source said: "HP has a new CEO and Carl Icahn could target that as he has before. Also knowing the character and background of [Xerox CEO John] Visentin, it doesn’t surprise me. In my opinion it would not be good for employees, customers or indeed the industry."

Both companies are in the process of cost cutting and shedding jobs, with the report stating that savings through synergies and further job losses could be as much as $2bn (£1.6bn).

The two firms also recently sealed a partnership deal with Xerox taking on HP’s office printers and its device as a service technology. They compete in some printing industry markets although HP's product range is broader and includes wide-format devices. 

HP is much larger than Xerox, with total sales of $58.5bn and a market cap of $29.89bn.

HP’s Graphic Solutions business – DesignJet, Latex, HP Indigo, HP Scitex and the PageWide presses – is part of its $4.7bn turnover Commercial Hardware business unit which also includes office printing and 3D printing. This business unit in turn is part of HP’s $20.8bn Printing division that includes home and office printing.

HP's biggest division is Personal Systems, which includes PCs. 

HP shares jumped by more than 12% to $20.64 on the speculation.

Xerox had sales of $9.8bn last year and has a market capitalisation of $8.26bn. Its high-end printing systems including the iGen, Iridesse (made by Fuji Xerox) and production inkjet presses brought in sales of $424m. Xerox’s shares were up 3.58% to $37.66 yesterday.

Financial reports suggested the offer could be $22 per HP share, with an overall value of around $30bn including debt. 

Both companies are also the result of a larger business splitting up its operations: Xerox split into two separate publicly-traded companies, Xerox and Conduent, at the beginning of 2017; while HP separated into HP Inc and Hewlett Packard Enterprise four years ago.

There had also been some industry speculation that a takeover bid could come from the opposite direction with HP taking over Xerox.

HP’s new chief executive Enrique Lores took over on 1 November and will announce its Q4 results later this month.

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