Xerox today issued a message to Hewlett-Packard that it would initiate a “hostile merger” process if HP refused to discuss a merger with Xerox by November 25. Earlier this month it was reported that Xerox had made an offer for HP, with a $33 billion cash and stock deal. HP later confirmed that it had received an offer from Xerox.
But on Sunday, HP’s board unanimously rejected Xerox’s offer. The HP board argued that Xerox’s offer understated HP’s value and was not in the best interests of shareholders. Xerox’s bid is understood to include 77 per cent cash and 23 per cent of shares, or $17 per share of HP shares and 0.137 Xerox shares.
In response, Xerox Vice Chairman and CEO John Vicente wrote to HP’s board today asking them to reconsider Xerox’s offer. “The Xerox Board of Directors is determined to move quickly and effectively forward with hp’s acquisition until the transaction is completed,” Mr. Wiesendin said in the letter. We see no reason to continue to delay. ”
In the letter, Mr. Wiesentin also said that if HP refuses to discuss a merger with Xerox by 5 p.m. EST on Monday (25 November) (6 a.m. Est on Tuesday), Xerox will initiate a “hostile merger” process, i.e. to submit the offer directly to HP shareholders.
In response to HP’s board’s rejection of Xerox’s offer, Mr. Wiesendin said the Xerox board was “very surprised” by the decision.
“Frankly, we are confused by the reasons for the rejection given by the HP board, ” mr Vicente said. After you announced your restructuring plan on October 3rd this year, your own financial adviser, Goldman Sachs, set HP’s target price at $14 and the stock rated ‘Sell’. Our offer is 57 per cent higher than Goldman’s target price and a 29 per cent premium to the $17 30-day volume-weighted average trading price. ”
HP’s market capitalisation is now about $29bn, more than three times Xerox’s.