BackHP rejects Xerox request to open books
HP said it has many options to create value for shareholders, including other merger and acquisition opportunities and share buybacks
PremiumHP Inc. rejected Xerox Holdings Corp.’s request to open its financial books Sunday after turning down its unsolicited merger offer last week, saying that the smaller suitor hasn’t proven it’s healthy enough to raise the funding or complete such a transaction.
“Your proposal does not constitute a basis for due diligence or negotiation," Chief Executive Officer Enrique Lores and Chairman Chip Bergh wrote in a letter to Xerox CEO John Visentin. Xerox’s bid of $22 a share undervalues HP and its threats to launch a proxy fight smack of desperation, according to the letter, which adds that Xerox has failed to answer questions about its financial health.
“It is clear in your aggressive words and actions that Xerox is intent on forcing a potential combination on opportunistic terms and without providing adequate information," the letter said. “Your now-public urgency to accelerate toward a deal, still without addressing these questions, only heightens our concern about your business and prospects."
Xerox representatives declined to comment. The company said last week that it would take its case directly to shareholders unless HP agreed to “mutual confirmatory due diligence" by 5 p.m. on Monday, Nov. 25. Xerox could launch a proxy fight or tender offer to gain control of its larger rival.
HP said it has many options to create value for shareholders, including other merger and acquisition opportunities and share buybacks. “It is important to emphasize that we are not dependent on a Xerox combination," Lores and Bergh wrote.
HP is still willing to consider the potential value of a combination, but that’s dependent on Xerox being more forthcoming, the men wrote. They said Xerox has missed sales estimates in four of the past five quarters and that the revenue decline is projected to continue. HP is also concerned that the termination of Xerox’s joint venture with Fujifilm Holdings Corp. has damaged its ability to sell in Asia.
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