Xerox increases offer for HP to $36.5bn

HP's largest stockholders want better returns for their investment, Xerox argues

Xerox has upped its takeover offer for HP Inc by two dollars per share, increasing the total value to $24 per share in cash and stock equivalents.

The proposal increases the headline value of the company's offer for HP from $33.5 billion to around $36.5 billion.

The company says it will now pay $18.40 in cash and 0.149 in Xerox's own shares for each HP share. Previously, it had offered to pay $17 in cash per share and 0.137 shares of Xerox for each share of HP.

According to Xerox, this latest offer "represents a 41 per cent premium to HP's unaffected 30-day volume weighted average trading price of $17".

The company added that it has met many of HP's largest stockholders in recent days, and claimed that they all want better returns and "best-in-class human capital" for their investment, which they believe can only result from a merger of HP and Xerox.

"The value created by the synergies realised in a combination of Xerox and HP is incremental to any value that HP can create by revising its strategic plan or dramatically changing its capital allocation policy to incorporate additional share repurchases," Xerox said in its press release.

"Xerox's offer provides HP stockholders with both significant, immediate cash value, and meaningful upside via equity ownership in the combined company," it added.

Xerox latest offer comes within weeks after the company nominated a full slate of 11 independent candidates to replace HP's board of directors at HP's 2020 annual meeting of stockholders.

The candidates nominated by Xerox include former CEOs, consultants and investment bankers.

Xerox has been trying to acquire HP for the past several months, but it has only seen its bids rejected twice by HP board.

In November, Xerox said that it had made an offer to buy HP for $33 billion, more than three times the market value of the printer maker. It believes it can achieve up to $2 billion in annual cost savings after acquiring HP.

Xerox' offer was, however, rejected by HP on the grounds that it significantly undervalued the company and was not in the best interests of HP shareholders. HP's board was also concerned that a combined company might struggle with "oversized debt".

HP informed Xerox that it was ready to explore a new offer if it is supplied with more due diligence information from the copier maker.

Billionaire activist investor Carl Icahn - who holds a 10.6 per cent stake in Xerox and a 4.24 per cent stake in HP - said he supports a merger between the two companies, which he described as a "no-brainer".

After HP rejected the buyout offer, Xerox threatened to go hostile and take its bid directly to shareholders.

In an open letter to HP, Xerox CEO John Visentin said that HP's "refusal to engage in mutual due diligence with Xerox defies logic".

Last month, copier maker announced that it had obtained $24 billion in binding financial commitments to back its proposed $33.5 billion cash and stock offer for HP.