HP Rejects Xerox Exchange Offer
March 05, 2020
HP has concluded that the unsolicited exchange offer from Xerox to
acquire all outstanding common shares of HP for consideration consisting
of cash, Xerox common stock, or a combination thereof is not in the best
interests of HP shareholders.
The HP Board unanimously recommends that HP shareholders reject the
Offer and NOT tender their HP shares pursuant to the Offer.
“Our message to HP shareholders is clear: the Xerox offer undervalues HP
and disproportionately benefits Xerox shareholders at the expense of HP
shareholders,” said Chip Bergh, Chair of HP’s Board of Directors. “The
Xerox offer would leave our shareholders with an investment in a
combined company that is burdened with an irresponsible level of debt
and which would subsequently require unrealistic, unachievable synergies
that would jeopardize the entire company.”
"At HP, we’re creating value, not risk,” said Enrique Lores, HP’s
President and CEO. "HP is a trusted brand with a strong track record of
value creation and we’re executing a clear plan that will drive
significant earnings growth. We’re well positioned in our categories,
aggressively attacking costs and pursuing the most value creating path
for our shareholders."
Reasons for the HP Board’s Recommendation
As further detailed in the Schedule 14D-9 filed with the Securities and
Exchange Commission and published on HP’s website, the HP Board
considered numerous factors in reaching its recommendation, including
but not limited to:
The Xerox Offer, in effect, principally offers HP shareholders something
they already own, and would disproportionately benefit Xerox
shareholders relative to HP shareholders.
The Xerox Offer would use HP’s balance sheet as transaction
consideration for the benefit of Xerox shareholders.
The Xerox Offer meaningfully undervalues HP by failing to reflect the
full value of HP’s assets and its standalone strategic and financial
value creation plan.
HP has a track record of execution that has resulted in strong,
consistent operational and financial performance.
The HP Board believes that HP’s standalone plan has positioned HP for
significant value creation.
HP’s strong balance sheet and financial flexibility provide multiple
levers for value creation.
The HP Board believes that the Xerox Offer would compromise the future
of HP and the value of shares of HP common stock by transferring value
to Xerox shareholders and leaving HP shareholders with an investment in
a combined company with an irresponsible capital structure, premised on
unrealistic synergies estimates.
HP believes that Xerox’s “synergy” estimates, including cost cuts,
exceed reasonably achievable levels.
The Xerox Offer includes a significant equity component, the value of
which the HP Board believes would be subject to significant risks and
Xerox does not have experience operating businesses in the sectors in
which HP operates, including within Personal Systems, Home Printing, and
3D and Digital Manufacturing.
Xerox has been experiencing declining sales and its recent sale of its
interest in the Fuji-Xerox joint venture raises significant concerns
about its future position.
HP believes that Xerox’s cost-cutting has come at the expense of
long-term value creation, and Xerox has demonstrated a lack of focus on
research and development.
The quantity and nature of the conditions of the Xerox Offer create
significant uncertainty and risk.
The HP Board believes that Xerox’s urgency in launching the Offer, while
simultaneously running a full slate of director nominees for election at
HP’s 2020 Annual Meeting of Shareholders, evidences Xerox’s desperation
to acquire HP to address its continued business decline.
The HP Board has received an inadequacy opinion from each of Goldman
Sachs & Co. LLC (“Goldman Sachs”) and Guggenheim Securities, LLC
(“Guggenheim Securities”) to the effect that, as of March 3, 2020, and
based on and subject to the matters considered, the procedures followed,
the assumptions made and various limitations of and qualifications to
the review undertaken set forth in their respective written opinions,
the consideration proposed to be paid to the holders (other than Xerox
and any of its affiliates) of shares of HP common stock pursuant to the
Xerox Offer was inadequate from a financial point of view to such
holders. The full text of the written opinion of each of Goldman Sachs,
dated March 3, 2020, and Guggenheim Securities, dated March 3, 2020,
which sets forth the matters considered, the procedures followed, the
assumptions made and various limitations of and qualifications to the
review undertaken in connection with each such opinion, is included in
Annex B and Annex C, respectively, to the Schedule 14D-9. Each of
Goldman Sachs and Guggenheim Securities provided their respective
opinions for the information and assistance of the HP Board in
connection with its consideration of the Xerox Offer. The respective
opinions of Goldman Sachs and Guggenheim Securities are not advice or a
recommendation as to whether any holder of shares of HP Common Stock
should tender its shares of HP Common Stock in connection with the Xerox
Offer or otherwise how to act in connection with the Xerox Offer or any
NO ACTION is required to REJECT the Xerox Offer.