In recent times HP Inc. (NYSE:HPQ) has received various buyout offers, but the company is not yet ready to give up its independence. The company rejected a bid by Xerox Holdings Corp (NYSE:XRX) to acquire the company at $33.5 billion.
HP rejects the bid because of undervaluation
The company rejected the offer to buy it at $22 per share, citing undervaluation and not in the best interest of its shareholders. PC and Printer maker is also skeptical regarding the ability of Xerox to pull off the deal. Xerox has seen its revenue decline in recent times, and a combined company will likely have massive debt.
On November 5, Xerox made a bid following discussions by the board for a cash and stock offer for HP. At the time, HP’s valuation was $27 billion, with annual revenue, which is six times more than that of Xerox. The deal expired on November 13, but HP could consider a better deal. The board of HP has indicated that considerable engagement with Xerox executives and access to important information can help them ascertain the value of the deal. HP is not averse of being bought, but it wants to ensure that the buyout is in the best interest of shareholders.
A combined company could be powerful
One person who might behind the proposal is activity investor Carl Icahn. He currently holds a 10.6% stake in Xerox, and recently, he bought a stake in HP worth $1.2 billion. He has openly indicated that a combined company between the two could potentially save a significant amount of money and succeed in the printer world.
HP could consider the proposals or reject any advance to buy it. Last month the company indicated that it would downsize by cutting around 9,000 jobs by 2022. Although it is not in a dire situation following the growth of its profits in the summer, it nonetheless wants to enhance its position. Equally selling to Xerox means the end of an era implying it won’t control its destiny. As a result, this seems like a trivial move for the company, even if it makes sense.