Printing services company Xerox is threatening to go hostile with its bid to purchase much larger rival HP. In a letter issued Thursday to HP's board of directors, Xerox urged the company to reconsider its buyout offer or else it would take its case directly to HP's shareholders.
In the letter, Xerox vice chairman and CEO John Visentin said the Xerox board "is determined to expeditiously pursue our proposed acquisition of HP to completion".
"We see no cause for further delay," Visentin wrote. "Accordingly, unless you and we agree on mutual confirmatory due diligence to support a friendly combination by 5:00 p.m. EST on Monday, November 25, 2019, Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders."
Xerox has 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.
"We note the decline of Xerox's revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects," HP's board wrote when rejecting Xerox's offer. "We have great confidence in our strategy and our ability to execute to continue driving sustainable long-term value at HP."
Palo Alto-based HP has faced a challenging market in recent years, coupled with sudden changes of leadership. Last August, HP chief executive Dion Weisler left the company and was replaced by Enrique Lores, the head of its printing business. The company has also seen a decline in its printing revenue and last month said it had to cut up to 9,000 staff globally, starting in 2020, as part of a company restructure.
As for Xerox, the company announced recently that it was selling its 25% stake in the nearly 60-year-old Fuji Xerox joint venture for $2.3 billion. Presumably, those funds would go toward its proposed buyout of HP.