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Xerox Made HP Shareholders an Official Tender Offer Worth $27 Billion

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Xerox announced yesterday that it made an official tender offer to purchase all outstanding HP shares with a mix of cash ($18.40) and stock (0.149 Xerox shares) totaling $24 per share. The company said it “has entered into an amended and restated commitment letter to add MUFG, PNC, Credit Agricole, Truist and Sun Trust Robinson Humphrey as commitment parties to provide a portion of the financing along with Citi, Mizuho and Bank of America."

Here’s what Xerox CEO John Visentin said about the tender offer yesterday:

“Our proposal offers progress over entrenchment. HP shareholders will receive $27 billion in immediate, upfront cash while retaining significant, long-term upside through equity ownership in a combined company with greater free cash flow to invest in growth and return to shareholders.”

Xerox also set up a dedicated websitewhere visitors will find “additional details on the offer, the benefits of the transaction to both companies’ stockholders and the Xerox management team.” The site is XplusHP.com, -- which is the kind of vanity URL one might expect from a wedding site rather than a corporate takeover -- and includes a “Tender Your Shares” button right at the top. Apparently, the time for nuance has passed; now it’s simply a matter of dollars and cents.

HP’s board of directors unanimously rejected Xerox’s proposed takeover in November 2019. The company said that it believed the offer “significantly undervalues HP and is not in the best interests of HP shareholders.” It also feared “the potential impact of outsized debt levels on the combined company’s stock” that would result from Xerox’s proposal. HP didn’t rule out the possibility of a deal, but so far the companies have been unable to reach an agreement.

Xerox then announced in January that it received $24 billion in financial commitments from Citi, Mizuho and Bank of America to assist with its attempted “value-creating combination with HP." Those commitments would not only demonstrate the seriousness of Xerox’s proposal but would also help it make a higher offer to HP, both of which could have made the deal more appealing. But now the company’s appealing directly to HP shareholders rather than its board of directors.

The proposal Xerox submitted in November would have given HP shareholders $22 per share--$17 in cash, plus 0.137 shares of Xerox--and would have given them 48% of the combined company. This new proposal offers an additional $2 per share. That might not have been enough to convince HP’s board of directors to agree to a takeover, but the company’s shareholders might be willing to sell directly to Xerox now that they’re able to do so.