Xerox ends its hostile takeover bid for HP amid coronavirus uncertainty

Merging the two companies would have brought long-term benefits for both, it insists

Xerox has finally dropped its hostile takeover bid for HP Inc. because of the market uncertainty stemming from the coronavirus outbreak.

The company announced yesterday that it was withdrawing its tender offer to HP shareholders and also ending the effort to win a slate of board directors in HP.

"The current global health crisis and resulting macroeconomic and market turmoil caused by COVID-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP," Xerox said in a statement.

It added that the decision is "disappointing", but its main priority at this time is to ensure the safety and well-being of its employees, customers, and other stakeholders.

The decision also reflects on Xerox' wider response to the pandemic, the company said, but insisted that combing the two companies would have brought long-term financial and strategic benefits for the firms as well as their shareholders.

Responding to Xerox latest decision, HP said that it remains "firmly committed to driving value for HP shareholders."

"We have a healthy cash position and balance sheet that enable us to navigate unanticipated challenges such as the global pandemic now before us, while preserving strategic optionality for the future," HP said.

"HP would like to thank our shareholders, partners, customers and employees for their input and continued support through this process," it added.

The end of Xerox' unwelcomed takeover offer for HP came less than two months after Xerox increased by nearly 10 per cent its buyout bid.

In November, Xerox announced that it had made a $33.5 billion cash-and-stock offer to acquire HP. Xerox said that the merge of the two firms would result in nearly $2 billion in cost savings over next two years.

However, HP rejected Xerox' offer, saying it significantly undervalued the company and was not in the best interests of HP shareholders.

Later, in February, Xerox upped its buyout offer for HP, saying that it was ready to pay HP shareholders $24 a share, valuing the company at more than $35bn.

Under new offer, HP shareholders would have received $18.40 in cash and 0.149 Xerox shares for each HP share.

The company disclosed that it had secured $24 billion in binding financing commitments from Citi, Mizuho and Bank of America, backing its proposed takeover.

In order to increase pressure on HP, Xerox also nominated 11 new directors to replace HP's current board at company's shareholder meeting in April.

But, last month, Xerox announced that it was pressing the pause button on its pursuit to acquire HP due to coronavirus outbreak.

The company, however, said that it would still move forward with the proposed board slate and its tender offer.

HP criticised Xerox for the decision and warned that a complex debt-based deal in the current economic environment could be disastrous for the merged company.

The personal computer and printer maker also urged its shareholders to reject Xerox' buyout offer, saying it would burden the new company with a high debt level that could potentially threaten its cash needs.