Xerox To HP: You’re Backing Out Due To Lack Of Confidence In Realizing Synergies
The takeover bid by Xerox Holding Corporation (NYSE:XRX) against HP Inc (NYSE:HPQ) has heated up matters between the two companies over the course of this month after it was revealed that Xerox was willing to offer HP shareholders $22/share to sell their stake in the company. Last week Xerox CEO John Visentin, in a strongly worded letter, stated that if HP Inc's board of directors does not open the company's books for due diligence by the end of the day yesterday, then Xerox will take its offer directly to HP's shareholders.
Following Its Letter Last Week, Xerox Announces Decision To Take Takeover Bid Directly To HP's Shareholders
A letter by HP's CEO and Chairman yesterday served to systematically dismantle Xerox's narrative against it. HP stated that Xerox itself is struggling to perform well, as the company has consistently missed on Wall Street's earnings estimates. The company's management went on to further state that Xerox's funding choices for the takeover offer will ensure that the new entity formed after the deal will take on serious debt.
Now, Xerox's CEO John Visentin is out with his reply. In his latest letter, Mr. Visentin states that HP's decision to continually spur Xerox's advances ''defies logic'' as it will let HP's shareholders benefit from immediate cash benefits and a stake in an entity that will be an ''industry leader''.
In response to HP's allegations that Xerox should first set its own house in order and then make takeover offers, the CEO turns to the company's three-year strategic plan it announced in February. Mr. Visentin states that Xerox has outperformed all three parameters laid out in this plan and the fact that the company's stock is 96% above year-to-date showcases market confidence in its progress.
Xerox's top executive also disputes HP's claim that by selling off its interest in Fujifilm, Xerox let go of viable future prospects. Mr. Visentin states that his company sold its interest in the company at 20x aggregate cash flow for 2019 and ensured that it won't run out of products to sell as a result.
In his most important claim, Mr. Visentin also states that HP's management lacks faith in itself to realize $2 billion in synergies that it had hoped would materialize following a merger with Xerox (NYSE:XRX). Finally, Xerox's CEO has also confirmed that the company will now take its proposal directly to HP's shareholders. The date and timing of when it intends to do this have not been shared.
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