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Xerox confirms it is making a hostile bid for HP

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After HP turned down its first offer to buy the company, Xerox is now planning to go ahead with its hostile bid by taking its $33.5bn offer directly to its rival's shareholders.

In an open letter recently sent to HP, Xerox CEO John Visentin said that the company's “refusal to engage in mutual due diligence with Xerox defies logic”. He also tried to dispel any of HP's concerns that Xerox would be unable to finance the transaction.

Visentin stressed the need for mutual due diligence between the two companies in his letter, saying:

“While you may not appreciate our “aggressive” tactics, we will not apologize for them. The most efficient way to prove out the scope of this opportunity with certainty is through mutual due diligence, which you continue to refuse, and we are obligated to require. We plan to engage directly with HP shareholders to solicit their support in urging the HP Board to do the right thing and pursue this compelling opportunity.”

Back and forth

Xerox decided to send a strongly-worded letter after HP sent a letter of its own to the company in which it claimed that there are “significant concerns about both the near-term health and long term viability of your business”.

In the letter, written by HP's independent board chairman Chip Bergh on behalf of its shareholders, HP responded to Visentin's first letter to the company and once again raised concerns about how Xerox would finance a potential deal, saying:

“The HP Board of Directors has reviewed and considered your November 21 letter, which has provided no new information beyond your November 5 letter. We reiterate that we reject Xerox’s proposal as it significantly undervalues HP. Additionally, it is highly conditional and uncertain. In particular, there continues to be uncertainty regarding Xerox’s ability to raise the cash portion of the proposed consideration and concerns regarding the prudence of the resulting outsized debt burden on the value of the combined company’s stock even if the financing were obtained. Consequently, your proposal does not constitute a basis for due diligence or negotiation.”

Before Xerox went public with a formal offer, the two companies had been engaged in talks for some time about a potential merger. HP has said that it would be willing to explore a merger if Xerox was able to provide due diligence information.

In addition to Xerox, billionaire activist Carl Icahn, who holds a 10.6 percent stake in Xerox and 4.24 percent stake in HP, is also pushing for a merger of the two companies.

Via The Inquirer