Xerox secures $24 billion in funding commitments for HP takeover

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Xerox Holdings Corp. on Monday said it had raised the $24 billion necessary for its proposed hostile takeover of HP Inc. The document company has received financial commitments from Citi, Mizuho and Bank of America.

In November, Xerox officials reached out to HP executives requesting due diligence surrounding a Nov. 5 proposition to acquire HP for $22 per share, which would comprise $17 in cash and 0.137 Xerox shares for each HP share. The proposal closely followed news that Fujifilm Holdings Corp. would buy out Xerox’s one-quarter share in Fuji Xerox Co. Ltd., a 52-year partnership that soured last year during a failed merger attempt.

HP turned down the offer, saying it “significantly undervalues HP and is not in the best interests of HP shareholders.” The computer company did, however, leave room for the possibility of its own acquisition of Xerox.

Had HP accepted the proposal its shareholders would have owned roughly 48 percent of the combined company. The offer represented a 20 percent premium to HP’s closing share price of $18.40 on Nov. 5.

In late November, Xerox said it would attempt a hostile bid by addressing HP shareholders directly, which it did in a 33-page presentation on Dec. 9. Among other things, Xerox Vice Chairman and CEO John Visentin said the value of the transaction “goes beyond economics.”

“In consolidating industries, first movers not only win but also have an opportunity to reshape the competitive landscape in an enduring way,” he wrote, noting that the cash flow generated by the deal would enable rapid de-leveraging and greater capital returns for shareholders.

In his Jan. 6 letter to HP leaders, Visentin said that dialogue with some of HP’s largest shareholders raised questions as to Xerox’s ability to raise the capital needed for the takeover, hence the financing commitments.

Last month, activist investor Carl Icahn—who led the charge against a Xerox and Fuji merger, eventually gaining control over Xerox’s new board—urged HP leaders and shareholders to take the deal with Xerox. Icahn in early November had purchased $1.2 billion in HP stock; bringing his total stake in the company to more than 4 percent; he also has a nearly 11 percent stake in Xerox.

Separately, a lawsuit filed last month against Icahn alleges he bought HP shares knowing that Xerox was considering buying the stock at a premium.

In December, Icahn told HP shareholders that the company’s refusal to entertain the acquisition proposal amounted to “little more than rearranging the deck chairs on the Titanic.”

Meanwhile, Fuji Xerox on Monday said it would end the technology agreement it had with Xerox when it expires March 31, 2021. At that time, the company’s name will change to FUJIFILM Business Innovation Corp.

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