At the start of this week, Xerox delivered on its promise to make an official tender offer for all outstanding shares of HP, after a back-and-forth between the two companies proved unfruitful for Xerox. The offer values HP shares at $24 each, of which $19 would be paid in cash, and the remaining value would be paid in Xerox shares. The offer is made directly to shareholders, which means that HP's Board of Directors doesn't get to control whether the offer is accepted or not.
Regardless, the Board is trying to convince HP's shareholders to not buy into Xerox's offer. A long list of reasons to justify the decision was provided, but the highlights are: the offer "significantly undervalues" HP, it offers shareholders something they already own, and it would create an "irresponsible capital structure", which would ultimately put the entire business at risk.
Chip Bergh, Chair of HP's Board of Directors, said:
“Our message to HP shareholders is clear: the Xerox offer undervalues HP and disproportionately benefits Xerox shareholders at the expense of HP shareholders (...). The Xerox offer would leave our shareholders with an investment in a combined company that is burdened with an irresponsible level of debt and which would subsequently require unrealistic, unachievable synergies that would jeopardize the entire company.”
Additionally, Enrique Lores, President and CEO of HP, also commented on the Board's position:
"At HP, we’re creating value, not risk (...). HP is a trusted brand with a strong track record of value creation and we’re executing a clear plan that will drive significant earnings growth. We’re well positioned in our categories, aggressively attacking costs and pursuing the most value creating path for our shareholders."
At this point, it's clear this won't be the last we hear about this story, as it's highly unlikely Xerox will back off at this stage. Its offer is on the table until April 21, which should line up with HP's annual shareholder meeting. Xerox has nominated a full slate of directors to replace the current HP Board, and it will be presented at the meeting as a way to push the acquisition forward.