Xerox officially drops hostile bid for HP amid coronavirus crisis

Firm withdraws its $35 billion offer due to market turmoil caused by COVID-19

Xerox has withdrawn its tender offer to acquire HP and merge the two companies, citing the global coronavirus pandemic and the resultant economic turmoil.

After spending the best part of six months chasing its rival, the legacy copying giant has put an end to its pursuit just weeks after offering to buy out the remaining shares from HP shareholders.

This offer was the latest move in the line of increasingly aggressive tactics Xerox had deployed to acquire HP, valued three times its size.

It followed several massive bids made in the last few months, stretching back to November 2019.

“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 Inc,” Xerox said in its latest statement.

“While it is disappointing to take this step, we are prioritizing the health, safety and well-being of our employees, customers, partners and other stakeholders, and our broader response to the pandemic, over and above all other considerations.”

The withdrawal means any prospect of a deal is certainly dead, at least while the COVID-19 crisis continues to preoccupy businesses and public services.

Despite this, Xerox remains adamant of the long-term financial and strategic benefits of any deal. Delaying tactics deployed by HP’s board and their refusal to engage, Xerox added in its statement, has done a massive disservice to stockholders.

The decision comes after HP issued a hands-off warning, suggesting any takeover or merger attempt would be “disastrous” as the coronavirus rampages across the world and wrecks the global economy.

HP used the cover of the global pandemic to blast Xerox should it consider any attempt to acquire the company amid the confusion and turmoil caused by market uncertainty in the near future.

Xerox, however, had already confirmed it would put its takeover attempt on ice. HP’s statement, it would appear, forced Xerox to go one step further.

A tale of two titans

Xerox sent shockwaves through the industry went it launched a surprise takeover bid for HP in November last year. The acquisition bid, valued at $30 billion, was rejected a couple of weeks later by HP’s board unanimously after some deliberation.

What followed was a war of words between chiefs of the two companies, who publicly debated the benefits and drawbacks of any prospective deal. Xerox signalled it would ramp up the aggression and put forward its case directly to HP’s shareholders.

Xerox then secured $24 billion worth of financing from Citi, Mizuho and Bank of America, which aimed to allay HP’s concerns about how the company could commit the required levels of funding to support any such takeover deal.

The company then proposed nominating directors to HP’s board in late January, through a set of industry “gurella tactics” aimed to twist HP’s arm, in addition to inviting shareholders to ‘come dine with’ Xerox officials. This was in advance of plans to launch a further takeover bid worth approximately $35 billion.

HP, in late February, outlined a fresh multi-year strategic plan to grow revenue, which also involved targeting the return of $16 billion of stock as part of a value creation programme - around half of the company’s market value.

The launch of HP’s plan barely deterred its rival, with Xerox officially launching its tender offer on 3 March, giving shareholders until 21 April to decide. This was rejected by the company almost instantly.

What the coronavirus pandemic meant for the economy was yet to be realised at this time. It was several weeks later that markets began collapsing and public services turned their full attention to clamping down on COVID-19.

After months of back and forth, the deal seems to be off, with the wider tech industry, including HP and Xerox, more concerned with the fundamentals of how to adapt their businesses and workforce to a coronavirus-ridden world.

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