Following stepped-up pressure in Xerox's hostile takeover bid this week, HP Inc. disclosed it will share more details about its alternative methods for improving shareholder value on 24 February.
On Monday, Xerox revealed that it plans to ask all HP shareholders to sell their shares through a tender offer, starting "on or around" 2 March.
To help entice shareholders, Xerox also said it will raise its takeover offer to US$24 a share, from US$22 a share previously. The new offer amounts to a US$34.9 billion acquisition bid for HP, up from US$32 billion originally.
On Tuesday, HP signalled that it won't respond to the latest move from Xerox right away. Instead, HP plans to wait to respond until reporting its latest quarterly earnings results--an event that is now scheduled for 24 February.
"At that time, when out of its quiet period, HP will share additional information about its plan to drive sustainable long-term value for its shareholders, including through the execution of the company’s multi-year strategic and financial plan and the deployment of its strong balance sheet," HP said in a news release revealing the timing of the fiscal 2020 first-quarter report.
The statement adds further weight to the expectation on Wall Street that HP is planning a repurchasing of shares for the near future. Share buybacks are often used by companies to boost their stock price and provide investors with returns. HP has recently mentioned share repurchases as an alternate option for creating shareholder value, versus accepting the Xerox takeover.
"HP wants its shareholders to have full information on the Company’s earnings and the value inherent in the Company before responding to Xerox’s February 10 press release," HP said in the news release Tuesday.
A Xerox representative declined to comment when reached by CRN USA on Tuesday.
Xerox contends that it has met with "many of HP's largest stockholders" and that there is interest in combining the two companies. The price just hadn't been right so far, Xerox acknowledged.
"The ask we hear most consistently from HP's investors is for greater equity ownership in the combined company," Xerox said in a FAQ page on its xplushp.com website.
HP's board of directors has repeatedly rejected the takeover deal since it was first proposed by Xerox in November.
While the HP board has said the original offer "significantly undervalues" its company, the board has criticised numerous other elements of the proposal, as well--including the large amount of debt that Xerox would need to raise to finance the deal.
Despite being the far smaller of the two companies, Xerox is seeking to absorb HP in order to bring together the largest players in the copier and printer markets, at a time when the industry is waning.
Previously, Morgan Stanley analyst Katy Huberty wrote in a research note that many HP shareholders actually see significant risks in merging with Xerox, including from Xerox's declining revenue. She also wrote that an offer of US$26 per share for HP would have a "greater likelihood of success."
“That being said we think Xerox faces risks on both sides of the coin in pursuing a deal for HP. In the event Xerox closes a deal for HP, the complexity of absorbing a company 4x as large raises the risk of integration issues, which the market is likely to penalize given Xerox's high debt levels (5.4x net leverage post-deal) post-close," she wrote in the note last month. "Conversely, not pursuing a deal means Xerox would have to rely on organic means to stabilize revenue, a risk unto itself."