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Nov 26, 2019

Xerox says HP stance on deal 'defies logic,' turns to holders

Signage is displayed outside HP Inc. headquarters in Palo Alto, California, U.S., on Thursday, Nov. 7, 2019. HP's board is still deliberating over a $33 billion takeover proposal from Xerox Holdings Corp., people familiar with the matter said, adding uncertainty to a potential blockbuster deal that would reshape the printing industry.

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Xerox Holdings Corp. said it plans to “engage directly” with HP Inc. shareholders to seek their support of an acquisition.

In a letter to HP’s board Tuesday, Xerox said it won’t apologize for its “aggressive” tactics in pursuing HP, after being spurned twice.

Xerox will go straight to stakeholders “to solicit their support in urging the HP Board to do the right thing and pursue this compelling opportunity,” the Norwalk, Connecticut-based company said. “Your refusal to engage in mutual due diligence with Xerox defies logic.”

Both companies have jostled for control in a potential combination. HP has said it’s open to exploring a deal, but only if it can do due diligence on Xerox to ponder an acquisition of the photocopier maker. Xerox gave HP until 5:00 p.m. Monday to agree to “mutual confirmatory due diligence.” Ahead of the deadline, HP questioned the health of Xerox’s business and whether it could raise the funding necessary for a transaction.

“It is clear in your aggressive words and actions that Xerox is intent on forcing a potential combination on opportunistic terms and without providing adequate information,” HP said Sunday in a letter. “Your now-public urgency to accelerate toward a deal, still without addressing these questions, only heightens our concern about your business and prospects.”

HP’s board of directors has unanimously rejected Xerox’s US$22-a-share bid, valued at more than US$33 billion in cash and stock. The board said it had significant questions about the trajectory of Xerox’s business and that Xerox would saddle the combined entity with too much debt if it were the acquirer.

HP has said it has many options to create value for shareholders, including other merger and acquisition opportunities and share buybacks.

Backers of a combination of the aging technology stalwarts include investor Carl Icahn, who raised his stake in HP to 4.2 per cent in the third quarter, according to regulatory filings. HP is undervalued and a merger with Xerox would benefit both companies through cost savings, Icahn said in an interview this month with the Wall Street Journal.