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HP says NO to partnership with Xerox

HP rejects partnership with Xerox Image

Most of us must be familiar with the HP and Xerox firms. HP is a famous computer and a printer maker, which was found in 1939. Xerox was founded way back in 1906. All of us are quite familiar with the famous xerox machine, which is quite common everywhere. Both of these firms have a history of their own stories.

Now, as per a few reports, HP has rejected a $33 billion deal (approximately 236,000 crores) involving Xerox’s takeover offer. HP feels that Xerox is underestimating the value of the company by offering this amount of money.

HP accepting Xerox’s offer would have resulted in a tie-up of both these firms, each having its own story. As we all know, the xerox machine is a very common name in most households. HP started its business by creating audio equipment. However, as time passed, it slowly found itself getting established into the Silicon tech industry.

The HP board of directors has written down a letter to the Xerox chief executive John Visentin. In the letter, they have clearly stated that they are rejecting the proposal put forth by Xerox.

The letter quoted the following reason, which was penned down by the HP chief executive Enrique Lores and board chairman Chip Bergh: “We reiterate that we reject Xerox’s proposal as it significantly undervalues HP. There continues to be uncertainty regarding Xerox’s ability to raise the cash portion of the proposed consideration”.

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In response to the above, Xerox has stated that it is very surprising that HP had declined its offer. Accepting the offer would have placed the value of each share of the company at $22. John Visentin had also stated that the offer put forth by Xerox contains a 29% premium of HP’s average trading costs.

Carl Icahn, an activist investor, had referred to the tie-up as a “no-brainer” in a statement to the Wall Street Journal. According to Icahn, the returns would just increase for shareholders for both the companies.

In case the deal does not get sealed, Xerox said that it plans on taking its offer directly to the shareholders of HP. In a letter to HP last week, Visentin had stated that “The overwhelming support our offer will receive from HP shareholders should resolve any further doubts you have regarding the wisdom of swiftly moving forward to complete the transaction”.

At present, Xerox’s cash stock is pretty high. This is because it has sold 25% of its stakes Fujifilm, which was part of a joint venture with the Japan-based group. The deal ended in Xerox receiving $2.3 billion. This put an end to an almost two-year-old fight.

On Sunday, HP’s chief executive and board chairman had stated that they were not pretty comfortable rushing too fast in order to seal the deal with Xerox. This was considering the fact that of late, Xerox’s revenues had dropped to quite an extent. They were also of the opinion that the decision taken by Xerox to quit the joint venture with Fujifilm was not a good one. They felt that Xerox had drilled a high strategic, sizeable hole into its portfolio.

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