Xerox's Takeover Bid for HP Ends as COVID-19 Spreads

Xerox‘s takeover bid for HP is over. The company cited the coronavirus pandemic and subsequent economic turmoil for ending to the effort to acquire the tech giant.

Xerox, which started its pursuit of HP in November, less than two weeks ago pointed to COVID-19 for stalling its momentum to acquire its bigger rival. On Tuesday, it withdrew its tender offer to buy HP and won’t nominate candidates to HP’s board of directors.

“While it is disappointing to take this step, we are prioritizing the health, safety and well-being of our employees, customers, partners and other stakeholders, and our broader response to the pandemic, over and above all other considerations,” Xerox said in a statement.

The vendor reiterated what it views as “compelling long-term financial and strategic benefits” from a combined Xerox and HP.

“The refusal of HP’s board to meaningfully engage over many months and its continued delay tactics have proven to be a great disservice to HP stockholders, who have shown tremendous support for the transaction,” the company said.

In a letter to HP shareholders on March 25, HP emphasized its commitment to managing the company through the pandemic. It also stressed focusing on its business and the needs of shareholders, customers, 250,000 partners, and 55,000 employees, worldwide. The letter further addressed the proposals made in Xerox’s takeover bid for HP.

HP’s Enrique Lores

Enrique Lores, president and CEO of HP, and Chip Bergh, board president, wrote on behalf of the board of directors:

“We have consistently expressed deep concerns about the irresponsible capital structure that is reflected in Xerox’s proposal. Their proposed structure would saddle HP with a level of debt that it could not support, potentially leaving the company without the cash needed to effectively run the business. We believe this would put the company at risk of being in financial distress immediately under consummation of Xerox’s proposed transaction. On top of this, the highly leveraged capital structure Xerox wants to implement could threaten the stability of the entire HP ecosystem and the livelihoods of our employees, customers and partners.

“With regard to the cash portion of Xerox’s proposal, it is also important that HP shareholders understand that there would be six to 12 months of significant uncertainty before knowing whether the conditions are satisfied, and the transaction could be funded and closed. Even if Xerox is able to maintain its bridge commitments and raise additional equity financing, which is far from certain in the current climate, there are many conditions to its proposal that create uncertainty. These include regulatory approval across many countries, funding of the bridge commitments, new funding for the ongoing business, and Xerox’s securing approval of the transaction by shareholders.”

Xerox also recently announced the acquisition of two services and technology providers in the U.K. Altodigital and ITEC Connect offer managed print services and IT services, growth areas for Xerox. The company is focusing on expanding its SMB reach in Europe.

Earlier this year, Xerox bought Arena Group, a U.K.-based, provider of office technology, software, solutions and services.