HP adopts shareholder rights 'poison pill' to prevent Xerox takeover

The plan will expire in one year

HP Inc has adopted a shareholder rights plan to ward off Xerox, a move, it claims, to ensure that shareholders have "sufficient time and full information" to consider any formal offer from Xerox.

The plan, which expires in one year, will enable HP shareholders to increase their dividends and voting powers in case an outside entity acquires 20 per cent or more of HP shares.

The move could help HP fend off the increasingly hostile takeover bid launched by Xerox or, at the least, to delay an acquisition bid, according to industry experts.

Just last week, Xerox announced that it was planning to launch a tender offer for HP shareholders, starting "on or around" 2^nd March. The printer maker raised its takeover offer by two dollars per share, increasing the total value to $24 per share in cash and stock equivalents. The company said that for each HP share, a shareholder would receive $18.40 in cash and 0.149 Xerox shares.

Xerox also said that the tender offer won't be subject to any conditions related to financing or due diligence.

In a news release on Thursday, HP said that its board of directors decided to adopt the shareholder rights plan to make sure that HP shareholders have full information when considering any tender offer from Xerox.

If a business acquires 20 per cent or more of HP shares, all shareholders outside that group will be able to buy additional discounted shares, thus diluting the group's ownership.

HP said it will give additional information on the issue on 24^th February when it reports financial results for the first quarter.

The shareholder rights plan will not prevent HP's merger with Xerox or any other business, according to HP, but should encourage the party to negotiate with the HP Board "prior to attempting to impose some combination that is not in the best interests of the HP shareholders".

It will also guard against "coercive tactics to gain control without paying all shareholders an appropriate premium for that control," HP said.

Xerox first put a $33.5 billion cash-and-stock offer to HP's board in November last year, but that offer was rejected on the grounds that it significantly undervalued the company.

Xerox then threatened to take its bid hostile. The company said it had met "many of HP's largest stockholders" and that they are interested in the merger of the two companies.

While it still has yet to go hostile on HP, last month, Xerox upped the pressure in its takeover battle by nominating 11 new directors to replace HP's current board at company's shareholder meeting in April.

The printer maker also announced that it had obtained $24 billion in binding financial commitments to back its proposed takeover of HP.

Reuters reported earlier this week that Xerox was planning to host a dinner for HP shareholders at a restaurant in the Riverside neighborhood of Greenwich, Connecticut, which could be attended by Xerox CEO John Visentin.