WSJ
Xerox Considers Takeover Offer for HP
Nov. 5, 2019 10:50 pm ET
wsj.com
Bid for HP would be at a premium to company’s market value of $27 billion
HP historically sold printers at a loss and then made money selling ink cartridges for them. A new sales model will attempt to lock customers into recurring ink purchases for a discount at the time of printer purchases. It has also been investing in 3-D printing.
Given businesses’ and consumers’ declining reliance on the printed page, bankers consider companies like Xerox, HP and Japan’s Canon Inc.to be primed for consolidation.
HP and Xerox shares have diverged recently.
Xerox shares are up 84% so far this year after the company launched a cost-cutting program, reported better-than-expected third-quarter earnings last week and raised its 2019 outlook. The stock rose by about 5% Tuesday on news of the deal with Fujifilm. Xerox CEO John Visentin said on its earnings call that the company’s improved cash flow makes it well-positioned to do deals big and small.
HP shares, meanwhile, are down 10% so far this year. It is slated to report its fiscal fourth-quarter earnings Nov. 26.
Billionaire investor Carl Icahn owns a 10.6% stake in Xerox. Mr. Icahn began lobbying for changes at the company in 2015. Two years later, he launched a board fight, telling The Wall Street Journal that Xerox “will go the way of Kodak if there aren’t major changes.” In 2018, he and Darwin Deason, another major shareholder, scuttled Xerox’s planned merger with Fujifilm, took control of its board and replaced its CEO with Mr. Visentin.
Fujifilm sued Xerox in June 2018 for breach of contract and estimated damages of more than $1 billion. Fujifilm’s lawsuit alleged Xerox unlawfully terminated the merger due to pressure from Messrs. Icahn and Deason, who argued the deal undervalued Xerox.
Xerox’s agreement with Fujifilm to sell its joint-venture stakes and end the lawsuit allows Fujifilm to continue to be a major supplier to Xerox.
Edit
The article is dated yesterday, here's a portion of it:
Working in Xerox’s favor: It expects a $2.3 billion windfall from a deal to sell stakes in joint ventures with Fujifilm Holdings Corp. , which was announced Tuesday along with the dismissal of a $1 billion-plus lawsuit filed against Xerox by the Japanese technology company.
Xerox has also received an informal funding commitment from a major bank, known as a “highly confident letter,” the people said. |
