VIRUS: Xerox pauses hostile HP takeover bid

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Xerox has put its hostile takeover bid for HP on ice, citing the need to focus on the coronavirus, and saying it has nothing to do with the plummeting stock prices of both companies.

Image courtesy of Xerox Corporation 
Paused: Xerox bid for HP

The big red has been engaged in an escalating battle with the HP board for control of HP – a company five times its size – driven by activist shareholder/corporate raider Carl Icahn.

Launched in December, the hostile bid has seen Xerox trying to woo HP shareholders with a $24-a-share offer, made up of $18.40 in cash and the rest in Xerox stock of 0.149 of a share, in a deal which amounts to US$35bn.

However, the HP share price has plunged by 25 per cent in the current market crash, from $23.35 on February 25 to $17.18 today. The Xerox stock price has had an even more precipitous fall, losing a third of its value, it is down from $36.46 on 25 February to $23.96 today, meaning the $24 offer is now less than $23.

Xerox said its actions in pausing the bid were driven by the growing coronavirus crisis. John Visentin, Xerox vice chairman and chief executive officer said, “In light of the escalating Covid-19 pandemic, Xerox needs to prioritise the health and safety of its employees, customers, partners and affiliates over and above all other considerations, including its proposal to acquire HP.

“As we closely monitor reports from government and healthcare leaders across the globe and work with colleagues in the business community to minimise the spread and impact of the virus, we believe it is 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.”

Xerox denied the plunging stock values contributed to the decision to pause the takeover bid. The company said, “for the avoidance of doubt, Xerox does not consider the market decline since the date of its offer or the temporary suspension of trading in HP shares that occurred on March 10 and March 12 as a result of market-wide circuit breakers 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.”

In other developments aimed at fending off the bid, the HP board has written giant severance packages into its directors remuneration packages, and enacted the poison pill defence strategy, which will see it issue new shares should Xerox reach or exceed a 20 per cent stake in the business, in order to dilute their influence.

Carl Icahn owns 11 per cent of Xerox and 4.2 per cent of HP. John Visentin was installed as Xerox CEO when Icahn and fellow shareholder Dawson Deakin blocked a $6bn Fujifilm deal and ousted the board, including CEO Jeff Jacobson, who is now CEO of EFI, installed when it was bought by Siris private equity. The new Xerox chairman is also chairman of Icahn Enterprises, the investment vehicle of the 83-year-old billionaire, said to be worth around US$17bn prior to the latest stock market crash.

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