Xerox ends hostile HP Inc. bid, citing the coronavirus and market turmoil

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Xerox has canceled its hostile takeover bid for HP Inc., citing the coronavirus epidemic and the resulting market turmoil.

The copy machine specialist, which announced its change of course Tuesday, said that it would also “no longer seek to nominate our slate of highly qualified candidates to HP’s board of directors.”

“While it is disappointing to take this step, we are prioritizing the health, safety, and well-being of our employees, customers, partners, and other stakeholders, and our broader response to the pandemic, over and above all other considerations,” the company said in a statement. 

In response to Xerox dropping its bid, HP said that it would “remain firmly committed to driving value for HP shareholders.”

“We have a healthy cash position and balance sheet that enable us to navigate unanticipated challenges such as the global pandemic now before us, while preserving strategic optionality for the future,” HP said in a statement.

The move ends Xerox’s four-month odyssey to buy HP, which was pitched by Xerox management as a better way for the two companies to survive a declining printing market. HP repeatedly rebuffed Xerox’s advances and in early March said that the copy machine company’s $34 billion offer “meaningfully undervalues HP and disproportionately benefits Xerox shareholders.” 

Several analysts questioned Xerox’s ability to buy the larger HP. During the fall, when Xerox first made its plans public, HP had a market capitalization of $31 billion while Xerox has a market valuation of $8 billion. More recently, the coronavirus’s toll on the overall market has hit both companies hard, with HP’s market capitalization now at $25 billion and Xerox’s market valuation at just $4 billion.

HP has also repeatedly questioned Xerox’s ability to raise the necessary funding required for the acquisition. Xerox would have to add about $24 billion in debt for the deal, company filings said. 

In February, HP announced a $15 billion stock buyback plan, intended to entice shareholders and fend off Xerox’s advances.

Just a few weeks ago, Xerox was still moving ahead with its hostile takeover, despite the coronavirus pandemic worsening daily. 

At the time, Xerox CEO John Visentin continued to publicly promote the benefits of an acquisition, telling Fortune, “Printing is long overdue for consolidation” and noting, “The potential for cutting costs, for investing for the future, is tremendous.” 

But ultimately, the coronavirus and the havoc it has wreaked on the stock market and business, proved too much for Xerox. Still, Xerox left open the possibility that it may revisit its takeover plans if and when the coronavirus epidemic subsides.

“There remain compelling long-term financial and strategic benefits from combining Xerox and HP,” Xerox said. “The refusal of HP’s board to meaningfully engage over many months and its continued delay tactics have proven to be a great disservice to HP stockholders, who have shown tremendous support for the transaction.”

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