The board of HP Inc. issued a sternly worded letter to Xerox on Sunday, rejecting Xerox’s takeover offer and casting aspersions on its business.
HP said the two companies have been in discussions about combing their businesses since August but said the talks turned south amid “concern about your business and prospects.”
HP and Xerox both make printers and printing supplies, technologies that have been in decline for years. HP is also among the world’s largest PC companies.
Xerox proposed buying HP earlier this month for $33.5 billion, or $22 a share. It said the two fading companies could save billions of dollars by combining their businesses and using the savings to invest in new technologies.
Though Xerox’s headquarters are in Connecticut and HP’s are in Silicon Valley, the two companies have substantial outposts in the Silicon Forest. HP does advanced research in Vancouver and Corvallis, Ore., while Xerox’s color printing group is based at the old Tektronix campus in Wilsonville, Ore.
On Thursday, Xerox said that if HP refused to open up its books and begin the process of combining the companies that it would take its offer directly to shareholders in a hostile bid.
HP issued its reply Sunday, calling Xerox’s bluff.
Xerox’s offer “significantly undervalues” HP, the company said. HP noted that Xerox’s revenues are falling, and falling faster than Wall Street had anticipated. And HP said it doubts that combining the companies would save as much money as Xerox claims.
While HP remains open to a combination, the California company said it “has numerous opportunities to create value for HP shareholders on a standalone basis.”
The question now is how HP’s shareholders will react if Xerox takes its case directly to them. HP shares closed Friday at $19.94, below Xerox’s offer price, reflecting Wall Street’s skepticism that the two companies can come to terms and doubts as to whether there is any benefit in combing two fading companies.
Activist investor Carl Icahn is a wildcard in the saga. He owns about 11 percent of Xerox shares and 4 percent of HP and has said he believes ” a combination is a no-brainer.” With billions of dollars at his disposal, Icahn and allies could place great pressure on the two companies to come to terms.
