Xerox withdraws billion dollar offer for HP

HP headquarters

The hostile takeover of the computer manufacturer was canceled.

(Photo: AFP)

San Francisco The US printer manufacturer Xerox In the middle of the corona virus pandemic, the planned hostile takeover of the computer company HP stops. Xerox described Tuesday night’s move as disappointing, but necessary to focus on addressing the current crisis.

Xerox had $ 35 billion for the much larger one HP offered, which makes about six times as much annual turnover. The group should have largely financed the acquisition through new debt.

Not only the financial uncertainty caused by Corona seems to have made the deal impossible, but also the impact of the pandemic on the business of both companies: Xerox mainly sells large printers that are used in offices and are currently hardly used and least of all are bought. HP, on the other hand, benefits more from the trend towards home office.

The Silicon Valley pioneer makes two thirds of its sales with home computers, and its printers are also aimed at private individuals. In the crisis, Xerox’s business is under more pressure than HP’s.

The value of Xerox stock has halved in the past five weeks, while HP’s share certificates have fallen by around a quarter, about the same as the overall market.
Both papers suffered from the end of the takeover fantasy: Xerox shares fell by more than two percent in morning trading in New York, and HP shares fell by more than nine percent.

Icahn is already moving on

The streak puller behind the deal was the activist investor Carl Icahn, who at least temporarily held larger shares in both companies. Icahn already seems to have shifted his focus: In an interview with CNBC, the billionaire said recently that the shares of some corporations are now being “given away”. He had long considered the stock market overvalued, but now there are stocks of some solid companies to buy cheap.

The withdrawal is considered a victory for HP boss Enrique Lores, who had rejected the takeover offer published for the first time in November as too low. In February, Xerox increased its offer again, whereupon Lores showed unwillingness to talk.

Now the Spaniard, who has only been leading HP since November, is confident that HP can survive the crisis on his own: “We have a healthy cash position and a balance sheet that enables us to tackle unexpected challenges like a pandemic while at the same time being strategic To keep options open for the future. ”

HP has invested heavily in the development of industrial 3D printers in recent years. These were used in the times of Corona in the production of face or respiratory masks.

More: Follow the current developments in the corona crisis in our news blog.

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HP continues to resist Xerox acquisition

HP headquarters in Palo Alto

Management recently said it wanted to talk to Xerox to explore a possible combination in the interests of shareholders.

(Photo: AFP)

Palo Alto The PC and printer manufacturer HP Inc continues to resist the takeover efforts of the much smaller printer and copier manufacturer Xerox. Xerox’s offer reflects the value of HP not sufficiently reflected, announced on Thursday in Palo Alto, California. In addition, given the resulting debt, the acquisition would result in significant financial risks for HP shareholders.

Xerox has been trying to get HP since the fall, but it was down. In February the group increased its offer and since then has offered $ 24 per share in cash and Xerox paper. In total, Xerox would pay almost $ 35 billion for HP. The driving force behind a possible deal is the controversial US investor Carl Icahn, who holds large shares in both groups.

Most recently, HP management had said it wanted to hold talks with Xerox to explore a possible combination in the interests of shareholders, but at the same time had increased its share buyback program to $ 15 billion to help investors in the event of a hostile takeover attempt.

More: HP boss Enrique Lores is under pressure

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HP boss Enrique Lores is under pressure

San Francisco, Dusseldorf Enrique Lores has only been CEO of HP since November – and possibly the last in the company’s history, which is considered the forefather of all garage start-ups. In front of the garage at 367 Addison Avenue in Palo Alto, where Bill Hewlett and David Packard developed the first electronic measuring devices, there has been a bronze sign since 1989: “Birthplace of Silicon Valley”.

1989 was also the year in which Enrique Lores began his career HP started. The electrical engineer started as an intern, never changed employers and instead worked his way up over three decades. He experienced and shaped two splits: 1999 the spin-off of the medical technology and measuring instrument business, which went public as Agilent.

And in 2015 the separation from the business customer division HPE. The business with computers, printers, scanners and software for private customers remained. At this point in time, the company no longer looked like the pioneer, but rather like the old Uropa of Silicon Valley.

When the group was split up, Lores headed the “Separation Management Office”, then he took over the business area for printers and printing solutions, where he was responsible for taking over Samsung’s printing business in 2017. When Dion Weisler left the HP chief position for personal reasons in November 2019, Lores moved to the top of the group.

It was not an easy start: Lores has to implement a billion-dollar savings program in which up to 9,000 out of 55,000 jobs worldwide are to be cut.

There was hardly any improvement in the quarterly figures that the company published on Monday after the US stock market closed: In the three months to the end of January, profit fell 16 percent year-on-year to USD 678 million. Revenue decreased nearly 1 percent to $ 14.6 billion.

struggle with Xerox and Icahn

Now Lores also has to fight for HP’s independence. Shortly after taking office, the significantly smaller printer manufacturer Xerox made a takeover offer for HP, supported by activist investor Carl Icahn, who holds shares in both companies and publicly emphasized the great savings potential of a merger. HP management at Lores has repeatedly rejected the Xerox offer as too low.

However, Xerox was not satisfied with this, the copier manufacturer secured a line of credit of $ 24 billion from several banks and increased the offer to $ 35 billion. HP is open to talking about a merger, Lores said when he first presented quarterly figures – at least if the deal created value for shareholders and contributed “to HP’s strategic and financial plan”. The manager doubts that.

The product ranges of the two companies complement each other. Xerox manufactures large printers and copiers for offices, HP products for private users. However, business has been shrinking for years: In times of digitization, less and less printing is taking place.

Lores must now convince the shareholders that his company is doing better on its own. HP has announced an extensive share buyback program: Instead of five, he plans to invest $ 15 billion to increase the price, financed with new debt.

It doesn’t sound like a great strategic idea. More like the fear of the end.

More: HP had previously resisted being taken over by rival Xerox. Now HP is open to discussions.

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HP talks to Xerox about merger after slump in profit

Palo Alto The PC and printer manufacturer HP earned significantly less in the most recent business quarter. In the three months to the end of January, earnings fell 16 percent year-over-year to $ 678 million (€ 625 million), the company said on Monday after the US market closed in Palo Alto, California. Revenue decreased nearly 1 percent to $ 14.6 billion.

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