HP said it had rejected a US$33.5 billion offer from printer maker Xerox to buy the company but said it remained open to a potential merger
In an open letter to Xerox, HP's chief executive, Enrique Lores, and chairman Chip Bergh aired concerns that the deal would leave the combined company with "outsized debt levels" but recognised "the potential benefits" of a merger, suggesting discussions may still be on the table. Its board also said it had "significant questions" about the trajectory of Xerox's business and prospects, particularly given a recent decline in its revenue.
It's worth noting here that the company Xerox was looking to buy was HP Inc - the hardware vendor that sells PCs and consumer printers - rather than the enterprise data-storage company, HP Enterprise, which was spun off as a separate business back in 2015.
"We have great confidence in our strategy and our ability to execute to continue driving sustainable long-term value at HP", the board said.
A representative for Xerox, which is based in Norwalk, Conn., could not be reached immediately for comment. Xerox's letter said the offer remained open until November 13.
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According to the company, earlier in November, Xerox offered to buy HP for $33.5 billion due to be delivered in cash and stock. "With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction".
"In addition, we believe it is critical to engage in a rigorous analysis of the achievable synergies from a potential combination". "In addition, the board and management team continue to take actions to enhance shareholder value including the deployment of our strong balance sheet for increased repurchases of our significantly undervalued stock and for value-creating M&A [mergers and acquisitions]". Xerox has risen about 7.1% to $38.94, for a market cap of $8.42 billion.
Despite the rejection on the proposed takeover, HP said it remains "ready to engage" with Xerox in what it referred to as a "potential combination".
A combination has had the support of investor Carl Icahn, who filings last week show had raised his stake in HP to 4.2% of shares outstanding in the third quarter.
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