Three banks agree to loan Xerox billions to take over printer rival
HP told Xerox to show it the money. Well, it can now. According to published reports, Xerox secured $24 billion from three major banks to underwrite its hostile takeover of printer rival HP.
The Lowdown: American banks Citigroup and Bank of America, as well as Japan-based Mizuho Financial Group, will provide 72% of the financing required for the planned $33 billion buyout of HP.
The Details: Terms of the proposed loans were not disclosed. The proportion of the funding is approximately what Xerox proposed — roughly a 70/30 split in cash and stock — to acquire its much larger rival. The bank backing gives Xerox additional muscle in its hostile takeover effort.
Background: Xerox first offered to buy HP in November, saying the combination of the two companies would generate significant cost savings — up to $2 billion annually — and give them greater power in competing with foreign printer rivals.
HP rejected overtures twice, expressing confidence in its strategic plan under the new leadership of Enrique Lores. HP also called Xerox’s offer “too low” and questioned its ability to finance a deal. HP is the larger of the two companies, with a valuation nearly four times greater than Xerox.
Xerox responded to HP’s rejections by launching a hostile takeover, in which it will take its bid directly to shareholders.