Xerox’s take over attempt of HP is no secret. Both hardware driven companies(for the most part) are struggling to survive in the mostly software driven market. Xerox made an offer before, which was rejected since according to HP, the valuation was just too low for a settlement. To counter, Xerox has decided to offer the printer company $24 per share, driving the cost of a single share by $2.
Xerox has announced that it will offer a $18.40 in cash and 0.149 Xerox shares for each HP share sometime around March 2nd. The offer represents a 41% premium to HP’s 30-day volume weighted average trading price of $17.00, Xerox said. The company believes that the tie up will revive both companies and open up about $2 billion in synergistic value.
The news has boosted HP’s stock prices, which grew by 4.5% to $22.71 at 9:31 a.m. in New York Monday. They’re down 1.3% in the past 12 months, so this is a good news for the struggling company which is barely managing to keep its head above the water in the heated market.
The talks of the merger started from Activist shareholder Carl Icahn, who owns about 11% of Xerox and has a 4.3% stake in HP. Icahn has considerable pull in Xerox, by the virtue of him being the largest shareholder in the company. However, HP is still reluctant about the merger, claiming it has multiple routes to create value that don’t involve a merger with Xerox. That is why a representative from the company wasn’t available for a comment immediately after the announcement was made public by Xerox.
HP’s shareholders “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,” Xerox said in the statement, which seems very interested in the possible merger, almost in a way desperate way.
Also, rising PC sales might give HP an out as the company is also heavily involved in manufacturing personal computers. This could be another reason for Xerox to raise the bid, to make sure that HP is still interested in its attempts for this hostile takeover.