HP confirms receipt of offer by smaller printer rival but doesn’t comment on interest in being acquired
The reports of Xerox making a play to acquire HP are more than rumors. HP confirmed receiving an offer by Xerox to acquire it, and reports say the bid is for $22 per share, or roughly $30 billion. But HP is not saying whether it’s interested in the deal that would reshape the printer and PC market and channel.
The Lowdown: Based on confidential sources, CNBC and other news outlets are reporting that Xerox — which is one-third the size of HP — offered a cash-stock deal. The proposal gives HP shareholders 77% of the buyout in cash and the balance in Xerox stock. The end result would leave HP shareholders owning 48% of the new merged company.
The Details: Speculation is that Xerox, which has a market cap of about $8 billion, is looking to capitalize on the cost-saving syngeries of merging with HP. A merger of the two companies would result in more than $2 billion a year in annual savings through the elimination of redundant processes and expenses. HP, which is undergoing a sweeping global reorganization, announced it will eliminate 7,000 to 9,000 jobs over the next two years to cut costs.
The Impact: A merger of HP and Xerox, if it comes to fruition, would have significant implications for the technology market and the companies’ respective channels. The combination would likely amount to something similar to HP buying Compaq in 2002 for $25 billion to become the world’s largest PC manufacturer at the time. While Xerox and HP coming together would eliminate much cost, it would also lead to a significant reordering of supply chains, customer relationships, and partner channels that would take years to untangle.
Background: While HP and Xerox are rivals, they’re also significant partners. Earlier this year, HP and Xerox expanded their printer partnership in which Xerox sources A4 and A3 printer products from HP; HP sources some toner and other printer supplies from Xerox. Also, Xerox became a member of HP’s Partner First program to resell printers, PCs, displays, and devices as a service.
The Buzz: HP Statement: “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.”
Channelnomics Point of View: No one in the technology industry or channel should hold their breath for this deal to happen. While Xerox is making a move to buy HP, many questions remain about the financing and whether the combined company can support the remaining debt. Further, there’s a potential for HP to counter the offer to buy Xerox, which would have a substantially lower cost of acquisition with many of the same benefits. This story remains in the “wait-and-see” column.