HP Inc mulls acquisition proposal from Xerox
HP Inc is considering a 'business combination' proposal from Xerox
Xerox has held talks with HP Inc over a potential "business combination', the PC and printer maker has confirmed.
In a statement, the company admitted the approach, which had been trailed in a Wall Street Journal article on Tuesay citing 'people familiar with the matter'. However, the company will have to dig deep to make its cash-and-stock offer add up, with HP currently trading at a market value of about $27 billion, while Xerox is valued at around just $8 billion.
Xerox has received an informal funding assurance from a major bank, the WSJ claimed on Tuesday, although there is no guarantee that Xerox will actually make an formal offer for HP.
Xerox could generate up to $2 billion in annual cost savings for Xerox, the WSJ suggested, although it's not clear where these savings would come from.
In a statement, HP admitted that the two companies had considering a "business combination" more than once in the past, and added that it had even received a proposal this week, which it is considering.
"We have great confidence in our multi-year strategy and our ability to position the company for continued success in an evolving industry, particularly given the multiple levers available to drive value creation.
"Against this backdrop, we have had conversations with Xerox Holdings Corporation from time to time about a potential business combination... Most recently, we received a proposal transmitted yesterday [Tuesday].
"We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye towards what is in the best interest of all our shareholders."
HP Inc was formerly known as Hewlett-Packard, which was founded in 1939. In 2015, Hewlett-Packard underwent a demerger, separating its low margin PC and printers business, renamed HP Inc, from its enterprise business, renamed Hewlett Packard Enterprise (HPE).
HP is currently struggling with its printer business segment. The division's revenue for the third-quarter dropped five per cent year-on-year, despite the 2016 acquisition of Samsung's printer business.
Last month, the company said that it was planning to cut up to 9,000 jobs (nearly 16 per cent of its 55,000-employee global workforce) by the end of 2022. The job cuts are part of a restructuring programme intended to cut costs and boost profitability.
The company added that it planned to shake-up its struggling printer business under a restructuring programme that will include a price hike on printers that can be used with non-HP ink cartridges.
Norwalk, Connecticut-based Xerox, best known for its copiers and printers, has a market capitalisation of just $8.05 billion, much compared to HP's $27.27 billion. The company's share of the printing and copier market has been hit in recent years by the global trend towards cloud computing and other internet services.
The company said on Tuesday that it will sell its 25 per cent share in Fuji Xerox, the joint venture between Xerox and Japan's Fujifilm, for $2.3 billion.
This deal will give Fujifilm a 100 per cent stake in Fuji Xerox. Fujifilm also agreed to withdraw a lawsuit it filed against Xerox in 2018, seeking more than $1 billion in damages after Xerox scrapped its $6.1 billion deal to merge with Fujifilm.