HP to Xerox: Now is not the time to force a merger

HP has issued a letter to its shareholders deriding Xerox for advancing its tender offer and proposed slate of directors in the middle of the global coronavirus pandemic.

HP has issued a letter to its shareholders deriding Xerox for advancing its tender offer and proposed slate of directors in the middle of the global coronavirus pandemic. Xerox said two weeks ago that it was hitting the pause button on its pursuit to acquire HP while still moving forward with its tender offer and proposed board slate.

HP's board has consistently rejected Xerox's efforts to force a combination, and now says that a merger would be even more tenuous given the current economic environment and global health crisis.

"It is important for shareholders to understand that, under these circumstances and consistent with our fiduciary duties, we believe that we should not divert valuable time, attention and resources to a dialogue with Xerox about its proposed transaction," HP said in the shareholder letter. "Any complex, large-scale, highly leveraged transaction in the current economic environment could be disastrous for HP, its shareholders and our entire ecosystem. While we remain open-minded about M&A as a tool to add value for HP shareholders at the right time and on the right terms – it's abundantly clear that now is not that time."

HP goes on to reiterate its "deep concerns" about the capital structure reflected in Xerox's proposal, which it says would saddle HP with a level of debt that it could not support. 

HP's current board remains united behind HP leadership and its rejection of Xerox's takeover bid. Earlier this year HP announced a three-year strategic and financial value creation plan meant to drive earnings growth. The plan includes a capital return program aiming to return $16 billion to HP shareholders during fiscal 2020 to fiscal 2022. At the same time, HP said it was reaching out to Xerox "to explore if there is a combination that creates value for HP shareholders that is additive to HP's strategic and financial plan." 

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