HP announces three-year financial value creation plan to stave off Xerox takeover bid
The company plans to return approximately $16 billion to shareholders over the next three years
HP Inc has put together a three-year 'value creation plan' that, it claims, will drive earnings growth and provide an alternative for shareholders to Xerox's $36.5 billion takeover bid.
"Our three-year financial targets reflect a company at the top of its game, combining the industry's best innovation with disciplined cost management and aggressive capital returns to support a compelling investment in both the short and long term," Enrique Lores, president and CEO, HP Inc, said in a statement.
HP plans to return approximately $16 billion to shareholders over the next three years, equating to nearly 50 per cent of HP's current market capitalisation. According to the company, just under $15 billion of that amount will come from the company buying back its own shares.
HP also plans to repurchase $8 billion of HP shares over the next 12 months following HP's annual shareholder meeting in April this year.
The company is planning the buyback in an effort to convince shareholders that they shouldn't sell-out to Xerox. The takeover battle is now shifting to upcoming elections to HP's board, with Xerox putting together its own slate of candidates to replace HP's current board, which opposes Xerox's bid.
The PC and printer maker reported sales of $14.6 billion in the first quarter of its fiscal 2020 (ending 31st January). Profits for the quarter dropped by 15 per cent to $700 million, while earnings per share also fell.
On Monday, HP once again expressed its opposition to Xerox's February takeover proposal, saying it "undervalues HP, creates significant risk and compromises the future of our company".
The company argued that the proposal overstates the potential synergies by including HP's existing plans for cost reductions and productivity gains.
HP, however, said that it was ready to explore a proposal from Xerox that creates value for HP shareholders. "HP's Board of Directors is committed to pursuing the most value-creating path and to serving HP shareholders' best interests," the company added.
Just last week, HP announced that it was adopting a shareholder rights plan 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 came days after Xerox announced, on 10th February, that it was planning to launch a tender offer for HP. The company, best known for printers and photocopiers, also raised its takeover offer for HP by two dollars per share, increasing the total value to $36.5 billion in cash and Xerox stock.