Xerox is prepared to offer HP almost a month for the companies to examine each other’s books as it seeks to win over the computer and printer maker for a takeover offer, according to people familiar with the matter.
Xerox, one of the biggest sellers of photocopiers, is willing to give HP four weeks of mutual due diligence so the companies can weigh the merits of the US$22/share cash-and-stock deal as well as the envisioned cost savings of such a combination, said the people, who asked not to be identified because discussions are private.
Whether the time or scope of the access to one another will be sufficient for HP to agree to enter discussions with its smaller rival is unclear. People familiar with the matter said, however, that HP had offered Xerox a non-disclosure agreement in September, typically a precondition of due diligence, which had been refused.
The people added that while both HP and Xerox have acknowledged privately there is some rationale for combining, there are potentially intractable disagreements about which should be the buyer and which the seller, which management team should run the pro forma company, and which has a healthier underlying business.
Xerox, which had a market value of about $8-billion at the close of trading on Tuesday, is pushing ahead with a plan to acquire and manage bigger rival HP, which was worth about $27.3-billion before news broke on the potential deal. The offer of $22/share is a premium of about 20% to HP’s close last Tuesday.
A representative for HP declined to comment. Caroline Gransee-Linsey, a spokeswoman for Xerox, didn’t immediately return a call and e-mail outside of normal business hours.
HP confirmed last Wednesday that Xerox made a takeover offer a day earlier, a potential union of two iconic brands that would reshape the printing industry. The pair have had conversations about a potential combination “from time to time”, Palo Alto, California-based HP said in that statement. “We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye toward what is in the best interest of all our shareholders.”
Citigroup has agreed to provide Xerox financing to swallow HP, a person familiar with the matter said. The company would likely need to take on at least $20-billion of debt to close the deal.
HP, one of the world’s largest printer makers, and Norwalk, Connecticut-based Xerox are struggling as waning interest in office and consumer printing blunts their most profitable businesses. HP also has contended with a stagnant PC market. — Reported by Ed Hammond, with assistance from Caleb Melby, (c) 2019 Bloomberg LP