HP Inc. has announced that its Board of Directors, after consultation with its independent financial and legal advisors, has concluded that the unsolicited exchange offer from Xerox to acquire all outstanding common shares of HP for consideration consisting of cash, Xerox common stock, or a combination thereof is not in the best interests of HP shareholders.
The HP Board unanimously recommends that HP shareholders reject the Offer and NOT tender their HP shares pursuant to the Offer.
“Our message to HP shareholders is clear: the Xerox offer undervalues HP and disproportionately benefits Xerox shareholders at the expense of HP shareholders,” said Chip Bergh, Chair of HP’s Board of Directors. “The Xerox offer would leave our shareholders with an investment in a combined company that is burdened with an irresponsible level of debt and which would subsequently require unrealistic, unachievable synergies that would jeopardize the entire company.”
“At HP, we’re creating value, not risk,” said Enrique Lores, HP’s President and CEO. “HP is a trusted brand with a strong track record of value creation and we’re executing a clear plan that will drive significant earnings growth. We’re well positioned in our categories, aggressively attacking costs and pursuing the most value creating path for our shareholders.”
Reasons for the HP Board’s Recommendation
As further detailed in the Schedule 14D-9 filed with the Securities and Exchange Commission and published on HP’s website, the HP Board considered numerous factors in reaching its recommendation, including but not limited to:
•The Xerox Offer, in effect, principally offers HP shareholders something they already own, and would disproportionately benefit Xerox shareholders relative to HP shareholders.
•The Xerox Offer would use HP’s balance sheet as transaction consideration for the benefit of Xerox shareholders.
•The Xerox Offer meaningfully undervalues HP by failing to reflect the full value of HP’s assets and its standalone strategic and financial value creation plan.
•HP has a track record of execution that has resulted in strong, consistent operational and financial performance.
•The HP Board believes that HP’s standalone plan has positioned HP for significant value creation.
•HP’s strong balance sheet and financial flexibility provide multiple levers for value creation.
•The HP Board believes that the Xerox Offer would compromise the future of HP and the value of shares of HP common stock by transferring value to Xerox shareholders and leaving HP shareholders with an investment in a combined company with an irresponsible capital structure, premised on unrealistic synergies estimates.
•HP believes that Xerox’s “synergy” estimates, including cost cuts, exceed reasonably achievable levels.
•The Xerox Offer includes a significant equity component, the value of which the HP Board believes would be subject to significant risks and uncertainties.
•Xerox does not have experience operating businesses in the sectors in which HP operates, including within Personal Systems, Home Printing, and 3D and Digital Manufacturing.
•Xerox has been experiencing declining sales and its recent sale of its interest in the Fuji-Xerox joint venture raises significant concerns about its future position.
•HP believes that Xerox’s cost-cutting has come at the expense of long-term value creation, and Xerox has demonstrated a lack of focus on research and development.
•The quantity and nature of the conditions of the Xerox Offer create significant uncertainty and risk.
•The HP Board believes that Xerox’s urgency in launching the Offer, while simultaneously running a full slate of director nominees for election at HP’s 2020 Annual Meeting of Shareholders, evidences Xerox’s desperation to acquire HP to address its continued business decline.
