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HP-Xerox: It all started with a phone call…

March 2, 2020

A recent regulatory filing by HP suggests that Xerox and HP were in private conversations about the merger ahead of the official take-over bid and how Icahn is interested in a quick resolution.

In a recent SEC report filing, HP disclosed that “on 12 August 2019, Carl Icahn, the largest shareholder of Xerox, phoned Dion Weisler, HP’s then-chief executive officer. Mr Icahn communicated that he believed HP was a well-run company with a strong management team and stated that he had accumulated approximately 60 million shares of HP common stock, constituting 4.125% of HP’s then-outstanding shares of common stock. Mr Icahn further expressed his belief that there was considerable value in combining Xerox and HP, that HP should consider buying Xerox”.

Also disclosed in the regulatory filing, was that during these discussions between Icahn and Weisler, Icahn said that if HP would not buy Xerox, he would consider making an offer to acquire HP and that he wanted a transaction to occur quickly.

At the time, the filing says that Weisler expressed that HP was always open to hearing from its shareholders and that the board of directors of HP was focused on creating shareholder value. Following the call, on 13 August 2019, Icahn sent Weisler an e-mail attaching two Xerox slides showing estimated synergies of $3.5 billion that a combined company could achieve with full impact in 2023.

Furthermore, on 26 August 2019, Icahn called Weisler and expressed that he was focused on quickly pursuing a combination of HP with Xerox and asked Weisler for his views on HP buying Xerox. According to the report, Weisler expressed to Icahn that HP would require further information from Xerox in order to assess a potential acquisition and that he would follow up directly with Mr. Visentin. Later that day, Weisler sent Xerox CEO, John Visentin a list of threshold questions that would need to be addressed by Xerox before HP would engage in full discussions concerning an acquisition of Xerox.

The SEC filing also states that during a breakfast meeting on 4 September 2019 between Weisler and Visentin, Visentin stated that, strategically, Xerox’s Board believed that Xerox was out of organic growth opportunities and must either grow through a strategic acquisition or be acquired. He informed Weisler that Xerox had offered to buy Fujifilm Holdings Corporation’s interest in their joint venture, but Fuji had declined to enter into negotiations. Visentin further stated that Xerox could try to acquire HP, but that the extreme leverage that Xerox would need to take on to make such an acquisition and the resulting potential for a credit downgrade made it preferable for HP to acquire Xerox.

Visentin expressed a preference for HP to use its stock as acquisition currency but said that cash could also be acceptable. At that time, Weisler expressed he would evaluate the potential transaction.

Following on some further phone calls, Xerox then made a formal bid to take over HP.

To read the full SEC filing, click here.

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