Effort is designed to force Xerox and other potential buyers to negotiate with board
HP has adopted a shareholder rights plan, the latest step in its efforts to push back against rival printer maker Xerox’s unsolicited $35 billion takeover bid.
The Lowdown: The giant PC and printer maker also this week declared a dividend distribution initiative to slow down Xerox’s aggressive efforts, including plans to issue a tender offer to acquire all outstanding share of HP common stock.
The Details: The shareholder rights plan doesn’t prevent Xerox or any other company from trying to acquire HP but is designed to convince any potential buyers to negotiate with the HP board before trying other methods to gain shares.
In a statement, Xerox officials called the shareholder rights plan a “poison pill” the comes in reaction to the “overwhelming support” they’re getting from HP investors. They also said the company will move ahead with its tender offer.
Shareholder protections in HP’s plan include:
> Guards against coercive tactics: HP investors should be paid an appropriate premium for their shares rather than be pressured by potential buyers looking to gain control.
> One-year expiration date: The HP board could terminate the rights plan even earlier depending on circumstances.
> Investment protection: This ensures that shareholders will get long-term value from the shares of HP they’ve bought.
Shareholders will be able to exercise these rights only if a person or group acquires 20% or more of HP’s common stock. Each right will entitle shareholders to buy one one-hundredth of a share of new series stock for $100. If someone gains 20% of common stock, each right will enable its holder – other than those in the group with 20% of the stock – to buy HP common shares for $100.
The dividend distribution of one preferred share purchase right on each outstanding share of HP common stock will be made March 2.
The Impact: Shareholders will get more information from HP on Feb. 24, when the company plans to outline its multiyear strategic and financial plan. The company also will give shareholders access to HP’s full earnings and balance sheets before responding to Xerox’s efforts to buy outstanding shares.
Background: Xerox has been making a strong pitch directly to HP shareholders, including meeting with several of the larger ones. The takeover bid also has the support of activist investor Carl Icahn, who owns a 4.2% stake in HP and a 10.9% stake in Xerox. According to a report by Bloomberg, Icahn late last year also suggested to HP CEO Enrique Lores that HP buy Xerox.
Xerox is pushing for the deal despite HP being four times its size, arguing that a combined company will be a significant competitor in a changing printer market and could save $2 billion annually. HP officials have argued that Xerox is undervaluing the company and that they’re satisfied with their plans going forward.
The Buzz: “HP’s board is focused on creating long-term value for HP shareholders. We believe it is essential that HP shareholders have sufficient time and full information when considering any tender offer that Xerox may commence,” HP board chairman Chip Bergh said. “As we have previously said, we are very concerned about Xerox’s aggressive and rushed tactics, and any process that is not based on full information is a threat to our shareholders.”
“The HP board clearly adopted a poison pill because our offer is receiving overwhelming support from their shareholders,” Xerox officials said in a statement. “Regardless of what the company and its army of advisors announce Monday, we believe HP shareholders appreciate that the value we could create by combining Xerox and HP outweighs – and is incremental to – anything HP could achieve on its own. Despite the HP board’s intention to deny shareholders the chance to choose for themselves, we will press ahead with our previously announced tender offer and electing our slate of highly qualified director candidates.”