Xerox on Monday officially launched a tender offer to acquire HP. The company is offering $24.00 per share, or $18.40 in cash and 0.149 Xerox shares for each HP share. The tender offer is an increase above Xerox's initial proposal and aligns with HP's market value of $27 billion.
"Our proposal offers progress over entrenchment," said Xerox CEO John Visentin. "HP shareholders will receive $27 billion in immediate, upfront cash while retaining significant, long-term upside through equity ownership in a combined company with greater free cash flow to invest in growth and return to shareholders."
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's $27 billion market value is about three times that 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 wasn't good enough financially to buy a much larger company.
The saga continued in January when Xerox announced that it had secured $24 billion of binding financing commitments from Citi, Mizuho and Bank of America to support its proposed combination with HP. In a letter to HP shareholders, Xerox's CEO said the financing commitment was meant to show that the company had secured the necessary capital to fund its buyout proposal.
HP quickly shot down the funding commitment, saying it was irrelevant because Xerox's buyout offer was still too low.
Xerox then vowed to overthrow HP's existing board via shareholder vote, and then increased its buyout offer to $24.00 per share.
HP's current board remains united behind HP leadership and its rejection of Xerox's takeover bid. Last month 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."