Mar
31
2020
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Xerox drops $34B HP takeover bid amid COVID-19 uncertainty

Xerox announced today that it would be dropping its hostile takeover bid of HP. The drama began last fall with a flurry of increasingly angry letters between the two companies, and confrontational actions from Xerox, including an attempt to take over the HP board that had rejected its takeover overtures.

All that came crashing to the ground today when Xerox officially announced it was backing down amid worldwide economic uncertainty related to the COVID-19 pandemic. The company also indicated it was dropping its bid to take over the board.

“The current global health crisis and resulting macroeconomic and market turmoil caused by COVID-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP Inc. (NYSE: HPQ) (‘HP’). Accordingly, we are withdrawing our tender offer to acquire HP and will no longer seek to nominate our slate of highly qualified candidates to HP’s Board of Directors,” the company said in a statement.

As for HP, it said it was strong financially and would continue to drive shareholder value, regardless of the outcome:

We remain firmly committed to driving value for HP shareholders. HP is a strong company with market leading positions across Personal Systems, Print, and 3D Printing & Digital Manufacturing. We have a healthy cash position and balance sheet that enable us to navigate unanticipated challenges such as the global pandemic now before us, while preserving strategic optionality for the future.

The bid never made a lot of sense. Xerox is a much smaller company, with a market cap of around $4 billion compared with HP with a market cap of almost $25 billion. It was truly a case of the canary trying to eat the cat.

Yet Xerox continued to insist today, even while admitting defeat, that it would have been better to combine the two companies, something HP never felt was realistic. HP questioned the ability of Xerox to come up with such a large sum of money, and, if it did, would it be financially stable enough to pull off a deal like this.

Yet even as recently as last month, Xerox increased the bid from $22 to $24 per share in an effort to entice shareholders to bite. It had previously threatened to bypass the board and go directly to shareholders before attempting to replace the board altogether.

HP didn’t like the hostility inherent in the bid or any of the subsequent moves Xerox made to try to force a deal. Last month, HP offered its investors billions in give-backs in an effort to convince them to reject the Xerox bid. As it turned out, the drama simply fizzled out in the middle of a worldwide crisis.

Feb
25
2020
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HP offers its investors billions in shareholder returns to avoid a Xerox tie-up

To ward off a hostile takeover bid by Xerox, which is a much smaller company, HP (not to be confused with Hewlett Packard Enterprise, a separate public company) is promising its investors billions and billions of dollars.

All investors have to do to get the goods is reject the Xerox deal.

In a letter to investors, HP called Xerox’s offer a “flawed value exchange” that would lead to an “irresponsible capital structure” that was being sold on “overstated synergies.” Here’s what HP is promising its owners if they do allow it to stay independent:

  • About $16 billion worth of “capital return” between its fiscal 2020 and fiscal 2022 (HP’s Q1 fiscal 2020 wrapped January 31, 2020, for reference). According to the company, the figure “represents approximately 50% of HP’s current market capitalization.” TechCrunch rates that as true, before the company’s share-price gains posted after this news became known.
  • That capital return would be made up of a few things, including boosting the company’s share repurchase program to $15 billion (up from $5 billion, previously). More specifically, HP intends to “repurchase of at least $8 billion of HP shares over 12 months” after its fiscal 2020 meeting. The company also intends to raise its “target long-term return of capital to 100% of free cash flow generation,” allowing for the share purchases and a rising dividend payout (“HP intends to maintain dividend per share growth at least in line with earnings.”)

If all that read like a foreign language, let’s untangle it a bit. What HP is telling investors is that it intends to use all of the cash it generates to reward their ownership of shares in its business. This will come in the form of buybacks (concentrating future earnings on fewer shares, raising the value of held equity) and dividends (rising payouts to owners as HP itself makes more money), powered in part by cost-cutting (boosting cash generation and profitability).

HP is saying, in effect: Please do not sell us to Xerox; if you do not, we will do all that we can to make you money. 

Shares of HP are up 6% as of the time of writing, raising the value of HP’s consumer-focused spinout to just under $34 billion. We’ll see what investors choose for the company. But now, how did we get here?

The road to today

You may ask yourself, how did we get here (to paraphrase Talking Heads). It all began last Fall when Xerox made it known that it wanted to merge with HP, offering in the range of $27 billion to buy the much larger company. As we wrote at the time:

What’s odd about this particular deal is that HP is the company with a much larger market cap of $29 billion, while Xerox is just a tad over $8 billion. The canary is eating the cat here.

HP never liked the idea of the hostile takeover attempt and the gloves quickly came off as the two companies wrangled publicly with one another, culminating with HP’s board unanimously rejecting Xerox’s offer. It called the financial underpinnings of the deal “highly conditional and uncertain.” HP also was unhappy with the aggressive nature of the offer, writing that Xerox was, “intent on forcing a potential combination on opportunistic terms and without providing adequate information.”

Just one day later, Xerox responded, saying it would take the bid directly to HP shareholders in an attempt to by-pass the board of directors, writing in yet another public letter, “We plan to engage directly with HP shareholders to solicit their support in urging the HP Board to do the right thing and pursue this compelling opportunity.”

In January, the shenanigans continued when Xerox announced it was putting forth a friendly slate of candidates for the HP board to replace the ones that had rejected the earlier Xerox offer. And more recently, in an attempt to convince shareholders to vote in favor of the deal, Xerox sweetened the deal to $34 billion or $24 a share.

Xerox wrote that it had on-going conversations with large HP shareholders, and this might have gotten HP’s attention— hence the most recent offer on its part to make an offer to shareholders that would be hard to refuse. The company’s next shareholder meeting is taking place in April when we will finally find out the final reckoning.

 

Feb
10
2020
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Xerox sweetens HP offer to $24 per share as take-over drama continues

Ever since Xerox set its sights on HP last November, the companies have been engaged in an ongoing battle. Xerox would like very much to take over the much larger HP, while the printer giant has so far rejected Xerox’s advances. Today, Xerox decided to sweeten the pot, raising its offer by two dollars per share, from $22 to $24, or about $34 billion in total.

The company says it will make a tender offer officially on around March 2nd, which should give it more time to lobby shareholders, but Xerox claims to have spoken to larger HP stockholders, and they believe the larger number could finally push this over the finish line. Given HP’s previous reluctance, that remains to be seen.

“Xerox has met, in some cases multiple times, with many of HP’s largest stockholders. These stockholders consistently state that they want the enhanced returns, improved growth prospects and best-in-class human capital that will result from a combination of Xerox and HP. The tender offer announced today will enable these stockholders to accept Xerox’s compelling offer despite HP’s consistent refusal to pursue the opportunity,” the company wrote in a statement today.

The current dance between the two companies dates back to last fall, with Xerox believing the two companies would match up well together to become a printer giant, while HP’s board unanimously rejected the offer.

In a rejection letter last November, the company made clear it didn’t appreciate or welcome Xerox’s overtures:

“We reiterate that we reject Xerox’s proposal as it significantly undervalues HP.

“Additionally, it is highly conditional and uncertain. In particular, there continues to be uncertainty regarding Xerox’s ability to raise the cash portion of the proposed consideration and concerns regarding the prudence of the resulting outsized debt burden on the value of the combined company’s stock even if the financing were obtained,” the letter stated.

At the end of November, Xerox vowed to take the offer to shareholders. More recently, it said it would try to replace all of the HP board members who rejected the offer previously with a friendlier slate of candidates. That is slated to be voted on by stockholders at the HP stockholders meeting in April.

HP has not responded yet to this latest offer. Surprisingly, HP stock was down .12/share, or 0.81%, in early trading.

Note: We requested comment from HP, but had not heard from the company as we went to publish. Should this change we will update the report.

Jan
23
2020
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Xerox wants to replace HP board that rejected takeover bid

In Xerox’s latest effort to get HP to bend to its will and combine the two companies, it announced its intent today to try to replace the entire HP board of directors at the company’s stockholder’s meeting in April. That would be the same board that unanimously rejected Xerox’s takeover bid.

Xerox and HP have been playing a highly public game of tit for tat in recent months. Xerox wants very much to combine with HP, and offered $34 billion, an offer HP summarily rejected at the end of last year. Xerox threatened to take it to shareholders.

Now it wants to take over the board, announcing today that it had nominated 11 people to replace the current slate of directors.

As you might imagine, HP was none too pleased with this latest move by Xerox. “We believe these nominations are a self-serving tactic by Xerox to advance its proposal, that significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders,” HP fired back in a statement today emailed to TechCrunch.

It went on to blame Xerox shareholder Carl Icahn for the continued pressure. “We believe that Xerox’s proposal and nominations are being driven by Carl Icahn, and his large ownership position in Xerox means that his interests are not aligned with those of other HP shareholders. 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 stated.

The two companies exchanged increasingly harsh letters in November as Xerox signaled its intent to take over the much larger HP. HP questioned Xerox’s ability to raise the money, but earlier this month it announced had in fact raised the $24 billion it would need to buy the company. HP was still not convinced.

Today’s exchange is just the latest between the two companies in an increasingly hostile bid by Xerox to combine the two companies.

Nov
30
2018
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DoJ charges Autonomy founder with fraud over $11BN sale to HP

U.K. entrepreneur turned billionaire investor Mike Lynch has been charged with fraud in the U.S. over the 2011 sale of his enterprise software company.

Lynch sold Autonomy, the big data company he founded back in 1996, to computer giant HP for around $11 billion some seven years ago.

But within a year around three-quarters of the value of the business had been written off, with HP accusing Autonomy’s management of accounting misrepresentations and disclosure failures.

Lynch has always rejected the allegations, and after HP sought to sue him in U.K. courts he countersued in 2015.

Meanwhile, the U.K.’s own Serious Fraud Office dropped an investigation into the Autonomy sale in 2015 — finding “insufficient evidence for a realistic prospect of conviction.”

But now the DoJ has filed charges in a San Francisco court, accusing Lynch and other senior Autonomy executives of making false statements that inflated the value of the company.

They face 14 counts of conspiracy and fraud, according to Reuters — a charge that carries a maximum penalty of 20 years in prison.

We’ve reached out to Lynch’s fund, Invoke Capital, for comment on the latest development.

The BBC has obtained a statement from his lawyers, Chris Morvillo of Clifford Chance and Reid Weingarten of Steptoe & Johnson, which describes the indictment as “a travesty of justice,”

The statement also claims Lynch is being made a scapegoat for HP’s failures, framing the allegations as a business dispute over the application of U.K. accounting standards. 

Two years ago we interviewed Lynch onstage at TechCrunch Disrupt London and he mocked the morass of allegations still swirling around the acquisition as “spin and bullshit.”

Following the latest developments, the BBC reports that Lynch has stepped down as a scientific adviser to the U.K. government.

“Dr. Lynch has decided to resign his membership of the CST [Council for Science and Technology] with immediate effect. We appreciate the valuable contribution he has made to the CST in recent years,” a government spokesperson told it.

Aug
02
2017
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HP’s new Nvidia-powered backpack VR PC is designed for work, not play

 HP has a new entrant in that most curious PC niche – the backpack computer. A product of the virtual reality computing wave, the backpack PC provides all the power needed to drive high-quality VR headsets like Oculus Rift and HTC Vive, but with a form factor that allows the user to roam about untethered. The new HP Z VR Backpack is a bit different from the rest of the field, though,… Read More

Sep
12
2016
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Microsoft snatches HP CRM and service business from rivals Salesforce and Oracle

HP printer In what has to be characterized as huge win for Microsoft, it announced this morning it had secured a 6-year deal with HP, Inc to run Microsoft Dynamics’ customer relationship management (CRM) and service software. What’s more, it grabbed this deal at the expense of its rivals. HP, Inc. had been a Salesforce CRM customer, while Oracle had been its service software provider.… Read More

Apr
18
2016
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OpenText acquires HP customer experience content management for $170 million

OpenText headquarters OpenText, the Canadian content management company, announced today that it was buying much of the customer experience content management business from HP Inc, the consumer printer business that emerged after the HP split last year. The deal was for approximately $170 million, according to a statement released by OpenText. What’s more OpenText expects the assets to generate… Read More

Oct
21
2015
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HP Sells Network Security Business TippingPoint To Trend Micro For $300M

security globe On the heels of Dell buying EMC for $67 billion and Western Digital buying SanDisk for $19 billion, HP is selling off its TippingPoint network security business to TrendMicro for $300 million. TippingPoint is a provider of next-generation intrusion systems and network security solutions, and HP says that in future it will resell network security services from partners (including… Read More

May
18
2015
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Ansible Partners With Cisco, CSC, HP And Rackspace To Make Deploying And Managing OpenStack Easier

DSC09940 Enterprise IT automation service Ansible today announced that it’s partnering with HP, RackSpace, CSC, Cisco and the open source community to help make deploying and managing OpenStack clouds easier. While the open source cloud computing platform is now extremely powerful, few of its users would argue that it is very easy to stand up an OpenStack cloud. Read More

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