Company hits printer rival for pushing merger efforts during coronavirus outbreak
HP is criticizing Xerox for continuing its push to acquire its larger competitor during the coronavirus pandemic and is urging shareholders to wait until the global healthcare crisis is over to assess Xerox’s $35 billion bid.
The Lowdown: In a letter to shareholders posted online this week, CEO Enrique Lores and board chairman Chip Bergh said HP’s primary concerns during the COVID-19 pandemic is the health of its employees and the business needs of its customers and partners.
The Details: The company is putting its focus on a range of issues, from ensuring the safety of employees and dealing with supply-chain challenges to addressing customer liquidity needs and supporting the move of businesses to work remotely.
Given that, Lores and Bergh said HP can’t spend time and resources talking with Xerox about a proposed merger between the two printer companies.
Xerox on March 13 said it was putting its unsolicited pursuit of HP on pause, saying concerns about employees, customers, and partners should take priority and that the company would postpone additional presentations, media interviews, and meetings with HP shareholders.
However, the HP officials said that Xerox has continued to push its tender offer to shareholders and its own slate of HP directors in hopes of forcing a merger, which in normal times would be a bad move. Given the economic and social upheaval caused by the coronavirus outbreak, conditions for the deal are now even worse.
The Impact: In the letter, Lores and Bergh reiterated the company’s arguments against Xerox’s proposal, including what they called an “irresponsible capital structure” that would put on HP a level of unsupportable debt and the highly leveraged capital structure Xerox has in place for the merger. The proposal undervalues HP and creates risks that threaten the future of both companies, they wrote.
The Buzz: “It is important for shareholders to understand that, under these circumstances and consistent with our fiduciary duties, we believe that we should not divert valuable time, attention, and resources to a dialogue with Xerox about its proposed transaction,” Lores and Bergh wrote in the letter. “Any complex, large-scale, highly leveraged transaction in the current economic environment could be disastrous for HP, its shareholders and our entire ecosystem. While we remain open-minded about M&A as a tool to add value for HP shareholders at the right time and on the right terms – it’s abundantly clear that now is not that time.”