COVID-19 Stalls Xerox’s Bid for HP

Just when it seemed that nothing could stop Xerox’s relentless bid for HP Inc., along came COVID-19. In light of the pandemic, Xerox prioritized its focus on the health and safety of employees, customers and partners over its pursuit to acquire HP. 

Xerox put the brakes on its acquisition mission about one week ago, right on the heels of two filings — the first made March 9^th  in support of Xerox’s slate of independent candidates to replace the HP board of directors at HP’s 2020 annual meeting of shareholders and the second made on March 10^th to seek approvals from its shareholders related to the issuance of Xerox shares in connection with its offer to acquire HP.

HP hasn’t issued any press releases in response to Xerox’s filings and acquisition tactics since March 5^th.

Xerox’s John Visentin

“As we closely monitor reports from government and health care leaders across the globe and work with colleagues in the business community to minimize the spread and impact of the virus, we believe it’s prudent to postpone releases of additional presentations, interviews with media and meetings with HP shareholders so we can focus our time and resources on protecting Xerox’s various stakeholders from the pandemic,” said John Visentin, vice chairman and CEO at Xerox. 

At the same time, Xerox was purposeful in its messaging around COVID-19 and the decline in the financial markets and the value of HP shares.  

“For the avoidance of doubt, Xerox does not consider the market decline since the data of its offer or the temporary suspension of trading in HP shares that occurred on March 10, 2020 and March 12, 2020 as a result of marketwide circuit breaker procedures to constitute a failure of any condition to its offer to acquire HP. Xerox will take the same view on any future temporary trading halts, unless otherwise stated in advance.” 

HP’s Enrique Lores

While HP hasn’t issued any press releases lately, Enrique Lores, CEO at HP, shed some light on the Xerox-HP standoff in an article published in Barron’s on March 11^th. He also addressed talk of HP acquiring Xerox, its much smaller rival. About $40 billion, or two-thirds of HP’s $60 billion in revenue, comes from PCs, an area of its business where Xerox doesn’t compete. Xerox revenue is $10.26 billion. 

Regarding HP’s consistent rejection of Xerox’s acquisition bids, beginning in November 2019, Lores notes his reasons are the same ones the company has stated publicly: the price doesn’t reflect HP’s value, the high leverage a combined company would have and the citing of unrealistic synergies between the two companies. 

What about HP turning the tables on Xerox and acquiring them? 

“Hold on. There are three questions that need to be addressed first. How do we get the right value exchange between the two companies? How do we create an entity with the right capital structure? That’s the first conversation. How the companies get together, who buys whom – there are many ways of doing that, but we don’t think it should be the first conversations,” he said.