On Thursday, Xerox Holdings (XRX) made a takeover offer for HP Inc. (HPQ). Xerox’s takeover bid of $22 per share was at a 20% premium to HP’s closing price on Tuesday. The formal deal offer follows Wall Street Journal reports that surfaced earlier this week that Xerox might buy HP. HP had confirmed the takeover offer made by Xerox in a statement late on Wednesday. However, HP has not signaled yet that it would agree to the deal.
Xerox stock rose during Friday’s trading session on news of its takeover bid for HP Inc. Xerox stock traded up more than 5% during Friday’s trading session at 10:35 AM EST. On the other hand, HP stock trended down by 1.5% during the session.
HP-Xerox takeover offer
According to sources cited by CNBC, Xerox’s bid would consist of 77% cash and 23% of the stock. HP shareholders would receive $17 per share in cash and 0.137 Xerox shares for each HP share.
The offer price of $22 per share would value HP at around $33 billion, including debt. HP had a market value of $28.6 billion on November 7. In contrast, Xerox’s market capitalization is $8.4 billion.
What should HP do now?
Should HP consider this deal? Also, should HP consider an agreement coming from a company that is about three times smaller in terms of market value, as Xerox is? Many media outlets have given their views on the possibility and feasibility of this deal.
According to a November 7 Bloomberg report, HP shareholders aren’t yet convinced of the sale deal to Xerox. On November 8, Channel Asia reported that HP is open to other takeover offers for the benefit of its shareholders. On November 6, Jim Cramer, CNBC’s Mad Money host, stated that he doesn’t think that Xerox can manage to buy HP.
Notably, the combination of HP and Xerox would change the landscape of the printing industry. In its statement issued on Thursday, Xerox noted, “Our industry is long overdue for consolidation, and those who move first will have a distinct advantage.” The deal could result in significant cost savings.
The Xerox-HP deal makes sense as both companies have been struggling with decreased demand for paper amid the growing digital environment. Xerox’s printer and copier businesses have struggled, while HP’s printing business suffered from weak demand from printer supplies.
Although this deal could help HP resolve some of these challenges, HP is not completely convinced about the possible offer deal. In particular, HP wants to carefully look into the offer for the benefit of its shareholders. Xerox is now awaiting HP’s response. PC maker HP must reply within a week to Tuesday’s offer of $22 per share by Xerox.