Xerox Plans to Seek Control of HP Board After Snub
Penny Achile, a Xerox Corp. employee, waits for her ride home outside of Xerox’s office building in Rochester, New York. (Photographer: Andrew Dolph/Bloomberg News)

Xerox Plans to Seek Control of HP Board After Snub

(Bloomberg) -- Xerox Holdings Corp. is preparing to seek control of HP Inc.’s board after the personal-computer maker rejected efforts to negotiate an acquisition, according to people familiar with the matter.

The iconic printer maker is expected to submit at least a majority slate of directors ahead of a Friday deadline for nominations to the 12-member board, said the people, who asked not to be identified because the matter is private.

Xerox has no plans at this point to increase its bid for HP, the people said. The company is still finalizing its plans and may choose to run a full slate to replace the entire board, the people said.

Xerox executives have argued the tie-up would revive both companies, which have been struggling, with products that complement their hardware businesses. A deal would unlock about $2 billion synergies, they’ve said.

Representatives for Xerox and HP declined to comment.

Xerox’s plans were first reported by Dow Jones. If the company pushes ahead with a formal proxy fight, it would represent a new level of hostility between two hardware giants that have withered in a world increasingly driven by software.

Xerox Shrinks

Xerox’s machines revolutionized the way businesses run, but the shift away from printed documents has dented the Norwalk, Connecticut-based company, which has been declining in size for almost a decade.

HP, once the world’s largest technology company by revenue, has taken dramatic actions to remain afloat, including splitting from its server, software and services arms in 2015.

The company, based in Palo Alto, California, has grown modestly as it contends with a stagnant personal computer market. Still, HP believes it would be better off with a restructuring plan it announced last year than as part of Xerox.

Offer Rejected

HP in November rebuffed an unsolicited, cash-and-stock offer from Xerox worth an estimated $22 per share, saying it undervalued the company. HP also cited concerns about the financial health of its smaller rival, which has experienced declining annual revenue since 2012.

HP’s board said it was open to exploring a merger, but believed the offer price undervalued the company. Activist shareholder Carl Icahn, who owns about 11% of Xerox and has a 4.3% stake in HP, has pushed for a tie up between the companies.

Four of the seven Xerox board seats are held by representatives of Icahn and an allied shareholder. If Xerox took control of HP’s board, the two could, in effect, control both companies.

Xerox announced Jan. 6 that it had arranged a $24 billion loan with a group of banks to finance the takeover. HP and its advisers had earlier questioned Xerox’s ability to raise the money needed to handle the deal.

Following the financing announcement, HP said it believed the offer still undervalued the company.

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