HP has announced that its board of directors has unanimously rejected the proposal from Xerox to takeover the company.
HP had initially confirmed a bid for the company from Xerox acquisition earlier this month. As part of the deal, the board was considering a cash-and-stock offer above to HP's market value of $27 billion.
Xerox had proposed to offer HP shareholders $22 per share comprised of $17 in cash and 0.137 Xerox shares for each HP share, for a total transaction value of approximately $33.5 billion. If the transaction had gone ahead, the companies would have saved $2 billion in annual costs.
However, in a letter to Xerox vice chairman and CEO John Vistentin, HP board of directors said the the unsolicited proposal "significantly undervalues HP and is not in the best interests of HP shareholders".
See also: Xerox CEO: Our journey from paper docs to printed electronics (TechRepublic)
The board of directors pointed out some of the specific concerns it had with Xerox, including the company's declining revenue from $10.2 billion to $9.2 billion since June 2018, which it said "raises significant questions" for HP regarding the trajectory of the company's business and prospects.
Despite the rejection on the proposed takeover, HP said it remains "ready to engage" with Xerox in what it referred to as a "potential combination".
"We recognise the potential benefits of consolidation, and we are open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox," the letter said.
"However, as we have previously shared in connection with our prior requests for diligence, we have fundamental questions that need to be addressed in our diligence of Xerox."
Last year, Xerox abandoned a controversial $6.1 billion deal to merge with Fujifilm last year, after investors Carl Icahn and Darwin Deason lobbied against the agreement, claiming that it undervalued the firm.
Meanwhile, Palo Alto-based HP has for its part been facing a challenging market in recent years, with its fiscal results in Q3 2019 showing a 5% year-over-year drop in its printing revenue.
Last month, it said that it will cut up to 9,000 staff globally, starting in 2020, as part of a company restructure.
HP said Enrique Lores, head of its printing unit, will take over as CEO for Dion Weisler. Separately, HP's third quarter earnings were better than expected.
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Up to 10,000 jobs are expected to be lost due to the takeover.