“We received a proposal transmitted yesterday”
HP has confirmed an audacious takeover bid by rival Xerox: a company that reported revenues nearly seven times smaller than HP’s in their respective third quarters ($14.6 billion and $2.2 billion respectively).
The Wall Street Journal first reported yesterday that a deal may be pending, as Xerox announced that it was ending a 57-year joint venture with Japan’s Fujifilm amid aggressive corporate restructuring.
HP’s current market capitalisation is $29 billion. Xerox’s is $8.33 billion.
The WSJ reports that Xerox has “informal funding commitment” from a major bank.
Both companies are facing falling revenues and struggling to modernise as print profits slump. Xerox is midway through an ambitious push to cut IT costs, shift services to the cloud and emphasise its software offering; HP’s new CEO last month revealed he would be cutting 9,000 jobs as he moves to trim costs.
HP Takeover Bid: “A Record of Taking Action”
Xerox pulled the plug on a proposed $6.1 billion takeover by Fujifilm last year after activist investors Carl Icahn and Darwin Deason said it undervalued Xerox.
Icahn (Twitter bio: “Some people get rich studying artificial intelligence. Me, I make money studying natural stupidity”) holds approximately 11 percent of the company, which has staged a resurgence this year amid plans announced in February to radically streamline and modernise the company.
As Computer Business Review reported, that includes plans to cut IT costs from four percent of revenue to one percent, trim the number of applications it is running from 1,700 to 500, and cut its 8,000 suppliers to 3,000.
HP’s statement suggests the offer is being given positive consideration; the comment certainly doesn’t shoot it out of the water.
The company said: “As reviewed at HP’s most recent Securities Analyst Meeting, we have great confidence in our multi-year strategy and our ability to position the company for continued success in an evolving industry, particularly given the multiple levers available to drive value creation.
The company said: “Against this backdrop, we have had conversations with Xerox Holdings Corporation from time to time about a potential business combination. We have considered, among other things, what would be required to merit a transaction. Most recently, we received a proposal transmitted yesterday.
We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye towards what is in the best interest of all our shareholders.”