As part of its continued pursuit of HP, Xerox announced Monday that it has secured $24 billion of binding financing commitments from Citi, Mizuho and Bank of America to support its proposed combination with its much larger rival.
In a letter to HP shareholders, Xerox CEO John Visentin said the financing commitment is meant to dispel concerns that Xerox couldn't raise the necessary capital to fund its buyout proposal.
"We have always maintained that our proposal is not subject to a financing contingency, but in order to remove any doubt, we have obtained binding financing commitments (that are not subject to any due diligence condition) from Citi, Mizuho and Bank of America," Visentin wrote in the shareholder letter. "My offer stands to meet with you in person, with or without your advisors, to begin negotiating this transaction."
In November, Xerox offered to pay $22.00 per share for HP, consisting of 77% cash and 23% stock, or $17 in cash and 0.137 Xerox share for each HP share. HP's board unanimously rejected the bid, arguing that the offer significantly undervalued HP and was not in the best interest of its shareholders. HP has a market value of $27 billion, about three times the size of Xerox.
Xerox then sent a letter to HP's board of directors, urging the company to reconsider its buyout offer or else it would take its case directly to HP's shareholders. From there, HP's board of directors sent a fairly blunt letter to Xerox as well as Icahn Enterprises essentially telling Xerox that it just isn't good enough financially to buy a much larger company.
Undeterred, Xerox began to pitch the buyout to HP's shareholders, arguing that the increased cash flow of a combined HP/Xerox would help pare debt, increase capital returns to shareholders and drive greater investment in innovation. Xerox also said HP has key market gaps in segments where Xerox is strong, such as Office A3 and managed services. The complementary portfolios would increase the total addressable market for both brands, Xerox said.