Xerox Holdings Corp (NYSE:XRX) has announced that it has secured financing of around $24 billion for its proposed $33 billion acquisition of HP Inc. (NYSE:HPQ). HP is opposing the deal, and in November, it turned down Xerox’s offer of $22 per share, saying that it undervalued the printer and copier maker.
Xerox took acquisition proposal directly to shareholders
Xerox has continued to make attempts of a hostile takeover after it took its proposal directly to HP stockholders. The Norwalk, Connecticut based company has continued to present its case to shareholders after several weeks of back and forth. One of the advocates of the deal is popular activist investor Carl Icahn who holds a 10% interest in Xerox and a 5% stake in HP.
On Monday, Xerox CEO John Visentin issued a letter to the HP board informing them that they had already engaged some of the largest shareholders of HP regarding a deal. Visentin told the board that he offered to meet them and commence negotiations of the transaction.
Combination to boost revenue growth of the companies
According to Xerox, the combination of the two companies can help them enhance their position and grow their revenue. It argues that a merger is a compelling opportunity that will save the companies around $2 billion in costs in the next two years. This will thus result in revenue growth of around $1.5 billion in the next three years.
Initially, there were concerns regarding Xerox’s financial position to complete such a transaction. However, the latest funding from Bank of American, Citi, and Mizuho is a vote of confidence that indicated that Xerox is serious about the combination with HP.
Morningstar analyst Mark Cash indicated that one of the reasons for HP’s rejection of the deal was concerns regarding the financial position of Xerox. HP’s board had concerns about the almost 10% decline in Xerox’s revenue since last year, and therefore a combined company will be in a lot of debt. But it seems shareholders who initially opposed to proposal might reconsider.
