HP announced Sunday that its board of directors unanimously rejected Xerox's proposed takeover, which valued the company formerly known as Hewlett-Packard at roughly $33.5 billion, though it left open the possibility of further discussion.
The company also shared the letter that accompanied Xerox's offer. Xerox CEO John Visentin offered HP shareholders $22 per share in a mix of cash ($17) and stock (0.137 Xerox shares). That offer would leave HP shareholders with approximately 48% of the combined company, Visentin said, giving Xerox the remaining 52%. (Depending on any outside investors, negotiations and other aspects of the deal.)
Visentin said that Xerox's analysis showed that a combined company might lead to "cost synergies of at least $2.0 billion within 24 months." Half a billion of that was attributed to "cost savings by leveraging our scale, combined supply chain and distribution footprint," and the remaining $1.5 billion was attributed to "cost savings from combining our world class R&D groups and streamlining corporate functions."
HP was direct in its declination of Xerox's proposal. Here's how its letter started:
Our Board of Directors has reviewed and considered your unsolicited proposal dated November 5, 2019 at a meeting with our financial and legal advisors and has unanimously concluded that it significantly undervalues HP and is not in the best interests of HP shareholders. In reaching this determination, the Board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company’s stock.
But that doesn't mean HP isn't curious. It said that it has "fundamental questions that need to be addressed in our diligence of Xerox," especially where revenue is concerned, because of the "decline of Xerox's revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018." That decline "raises significant questions [...] regarding the trajectory of your business and future prospects."
Don't be surprised if the companies keep discussing a potential 'combination' in the future. At least they don't have to worry about finding somewhere to handle all the printing, photocopying and other administrative tasks involved with exploring multi-billion dollar deals. (Not including the cost of ink.)