Any possibility of a tie-up between Xerox and HP is ancient history, at least as far as the latter is concerned. In a statement issued earlier today, HP’s management argued committing resources to considering any major M&A activity in the near term would be frivolous and irresponsible. HP sees the current state of the world and related market uncertainties as far from ideal for planning large-scale consolidations and restructurings, even in case of generous offers by serious suitors. Needless to say, HP sees Xerox as anything but.
HP adamant it’s out of Xerox’s league
The Californian juggernaut has been snubbing increasingly aggressive advancements from its Connecticut-incorporated rival for almost a full year now, with its position on any merger proposal remaining consistent – Xerox can’t afford it. More specifically, HP repeatedly argued the unsolicited suitor vastly overstated potential synergies between the two in its forecasts while mostly ignoring HP’s own restructurings and changes aimed at improving its very own operational efficiency throughout 2020. Most importantly, Xerox, valued at around one-tenth of HP throughout this saga, hasn’t even mustered the majority of the funds required for the $35 billion buyout of HP it proposed at the beginning of the month.
A lot has happened since then, most notably in regards to the COVID-19 outbreak that continues to spread around the world at an alarming rate. Whereas the U.S. just hit 100 confirmed cases on March 2, the day of Xerox’s tender offer, over 103,000 Americans tested positive for the dangerous new SARS strain as of today, according to CDC data.
As tenacious as it may be, Xerox was forced to give up on HP when confronted with the looming threat of a global recession induced by the coronavirus pandemic. The blockbuster bid valued at $35 billion from early March was never really close to materializing, anyway; besides HP’s opposition, Xerox was yet to raise the majority of those funds. Even if it managed to do so, that feat would have left it in an extremely overleveraged state, HP repeatedly argued.
So, while analysts wouldn’t be surprised if Xerox resumed its attempt at a hostile takeover of HP years from now, there’s simply too many uncertainties currently standing in the way of any meaningful predictions on that front. The de facto inventor of modern printing technologies is hence left to lick its wounds and settle for smaller victories, all while biding time for another chance at staging a coup of HP’s board.
Author: Dominik Bosnjak