Xerox escalates HP takeover fight with push to replace board

January 23, 2020, 10:58 PM UTC
HP Inc.'s headquarters in Palo Alto, Calif.
HP Inc.'s headquarters in Palo Alto, Calif.
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Xerox Holdings Corp. said it intends to nominate 11 directors to replace the board of HP Inc. after the personal-computer maker refused to engage in takeover talks, according to a statement Thursday.

The iconic printer maker hasn’t increased its $22-a-share takeover offer after HP rejected its proposal, which it argues undervalues the company. Instead, Xerox will seek to replace HP’s entire board through a proxy fight to push the merger through.

The nominees include former senior executives from dozens of companies including Aetna Inc., United Airlines Holdings Inc. and Novartis AG.

“HP shareholders have told us they believe our acquisition proposal will bring tremendous value, which is why we lined up $24 billion in binding financing commitments and a slate of highly qualified director candidates,” said John Visentin, vice chairman and chief executive officer of Xerox.

Xerox filed its slate ahead of a Friday deadline for board nominations. The move could potentially be a precursor to Xerox taking its offer directly to shareholders through a tender offer at the current offer price or a premium if HP continues to rebuff its efforts, according to people familiar with the matter. No decision has been made on whether to pursue a tender offer, the price it would be put forth at, or when it would do so, the people said, asking not to be identified because the matter is private.

The push to replace the board marks an escalation of the simmering tensions between the two hardware giants that have withered in a world increasingly driven by software. Xerox has argued the tie-up would revive both companies and unlock about $2 billion in synergies.

“These nominations are a self-serving tactic by Xerox to advance its proposal, which significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders,” HP said in a statement.

HP said that it would review Xerox’s nominees and respond in due course. It also said that it was committed to serving the best interests of all shareholders, and that it had many avenues that it could pursue to create value. Those efforts are not dependent on a combination with Xerox, it said.

Activist shareholder Carl Icahn, who owns about 11% of Xerox and has a 4.3% stake in HP, has pushed for the tie-up.

HP said Thursday it believed Xerox’s proposal to acquire HP was being driven by Icahn. The billionaire has considerable influence over Xerox because he is its largest shareholder, the role he played in appointing Xerox’s CEO, who was a former consultant to Icahn, and the ties he has to members of the board, including its chairman, who is also the chief executive officer of Icahn Enterprises, HP said.

“Due to Mr. Icahn’s ownership position, he would disproportionately benefit from an acquisition of HP by Xerox at a price that undervalues HP,” the company said, adding that his interests were not aligned with those of other HP shareholders.

A representative for Icahn wasn’t immediately available for comment.

HP’s board currently has 12 members. Dion Weisler, the former chief executive officer of the company, has said he would step down at the next annual general meeting, which the company said would reduce the board size to 11. Its last annual meeting was on April 23.

HP in November rebuffed an unsolicited, cash-and-stock offer from Xerox, citing concerns about the financial health of its smaller rival, which has experienced declining annual revenue since 2012.

HP’s board said it was open to exploring a merger, but believed the offer undervalued the company.

Xerox announced Jan. 6 that it had arranged a $24 billion loan with a group of banks to finance the takeover. HP and its advisers had questioned Xerox’s ability to raise the money for the deal.

Following the financing announcement, HP said it believed the offer still undervalued the company.

Xerox’s director nominees are:

  • Betsy Atkins, CEO of Baja Corp.
  • George Bickerstaff, co-founder and managing director of M.M. Dillon & Co.
  • Carolyn Byrd, CEO of GlobalTech Financial.
  • Jeannie Diefenderfer, who spent 28 years at Verizon.
  • Kim Fennebresque, who was CEO of Cowen Group for nine years.
  • Carol Flaton, who has served as a managing director at AlixPartners.
  • Matthew Hart, who most recently served as president and chief operating officer of Hilton Hotels until the buyout of Hilton by Blackstone in 2007.
  • Fred Hochberg, who was most recently the chairman and president of the Export-Import Bank of the United States during the Obama administration.
  • Jacob Katz, who was chairman of Grant Thornton.
  • Nichelle Maynard-Elliott, who most recently served as executive director of mergers & acquisitions for Praxair Inc.
  • Thomas Sabatino, Jr. who most recently served as executive vice president and general counsel of Aetna Inc.

Citigroup Inc. is acting as Xerox’s financial advisor, and King & Spalding LLP is providing legal counsel to Xerox. Willkie Farr & Gallagher LLP is providing legal counsel to Xerox’s independent directors.

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