HP Inc. confirmed that Xerox Holdings Corp. submitted an acquisition offer, a possible agreement between two iconic technology names that would redefine the printing industry.
“We have talked with Xerox Holdings Corporation from time to time about a possible business combination,” the Palo Alto, California-based company said on Wednesday in a statement. “We received a proposal sent yesterday. We have a track record of committing ourselves to take action when there is a better way forward and we will continue to act with deliberation, discipline and an eye on what is best for all our shareholders.”
Citigroup Inc. agreed to fund Xerox to obtain HP, said a person familiar with the matter. The company is likely to need to assume at least $20 billion of debt to close the deal, according to information previously reported by the Wall Street Journal. The market capitalization of HP reached approximately 27.3 billion dollars at the close of Tuesday’s operations, while that of Xerox reached 8 billion dollars, before the news of the possible agreement was known. Xerox had extended an offer of $22 per share, the Financial Times reported, a premium close to 20% of HP at the end of Tuesday, before the news of a possible acquisition emerged.
HP has not decided whether the Xerox offer is the right deal, according to a person familiar with HP’s information. The computer manufacturer does not agree with Xerox regarding possible synergies and is concerned about the debt necessary for an agreement, said the person, who asked not to be identified by speaking publicly about internal conversations. Even if HP decides that a combination is worthwhile, it is not convinced that Xerox has the appropriate experience for a complex merger and does not believe that Xerox is the buyer, the person said.
HP, one of the world’s largest printer manufacturers, and Xerox, one of the largest photocopier vendors, have had to redouble their efforts because the growing interest in office and consumer printing has slowed down the most profitable businesses of both companies. In addition, HP has had to compete in a stagnant computer market.
Both hardware manufacturers have responded to changing markets with significant cost reduction measures. The new executive director of HP, Enrique Lores, announced another restructuring that could eliminate up to 16% of the workforce by the end of fiscal year 2022, amid the drop-in sales of his lucrative printer ink business. Xerox said it plans to cut $ 640 million in expenses this year. The photocopier company, based in Norwalk, Connecticut, expects a combined Xerox-HP entity to save at least $ 2 billion in expenses, according to the Journal.