Xerox offers slate of directors in HP hostile takeover bid

Listen to this article

In another round of unsolicited involvement, Xerox Holdings Corp. has offered up a slate of directors for HP Inc., a move the computer giant called “self-serving.”

As part of its ongoing hostile takeover attempt, Xerox this week said it would  nominate 11 independent candidates to replace HP’s board of directors at HP’s annual meeting of stockholders.

“HP shareholders have told us they believe our acquisition proposal will bring tremendous value, which is why we lined up $24 billion in binding financing commitments and a slate of highly qualified director candidates,” Xerox Vice Chairman and CEO John Visentin said in a statement. “We believe HP shareholders will be better served by a new slate of independent directors who understand the challenges of operating a global enterprise and appreciate the value that can be created by realizing the synergies of a combination with Xerox.”

In early November, Xerox made a $33.5 billion acquisition proposal, which offered HP shareholders $22 per share, comprising $17 in cash and 0.137 Xerox shares for each HP share. HP 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.

HP said the proposal “significantly undervalues HP and is not in the best interests of HP shareholders,” but also left the door open for a potential combination that would put HP in the driver seat. In return, Xerox pointed to cost synergies of more than $2 billion should the document company take control of HP.

Shortly thereafter, Xerox officials announced it would attempt a hostile takeover, going straight to HP shareholders with its proposal.

On Jan. 23, HP responded to Xerox’s proposed slate of directors, pointing a finger at Xerox majority shareholder Carl Icahn.

“We believe these nominations are a self-serving tactic by Xerox to advance its proposal, that significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders,” HP officials said in a statement.

HP officials contend that value creation for its shareholders “is not dependent on a Xerox combination.”

“We believe that Xerox’s proposal and nominations are being driven by Carl Icahn, and his large ownership position in Xerox means that his interests are not aligned with those of other HP shareholders,” the statement read. “Due to Mr. Icahn’s ownership position, he would disproportionately benefit from an acquisition of HP by Xerox at a price that undervalues HP.”

Icahn—who led the charge against a Xerox and Fuji merger, eventually gaining control over Xerox’s new board—in December urged HP leaders and shareholders to take the deal with Xerox. In early November the activist investor 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. A lawsuit filed last month against Icahn alleges he bought HP shares knowing that Xerox was considering buying the stock at a premium.

“Mr. Icahn has meaningful influence over Xerox and its board of directors given this ownership position; the role he played in the appointment of Xerox’s current CEO, who is a former Icahn consultant; and the ties Mr. Icahn has to members of the Xerox board, including Xerox’s chairman, an Icahn employee,” the HP statement concludes.

In defending its current board, HP officials said the company benefits from an independent board, including an independent chairman and 10 of 12 independent directors who include individuals that bring skills and expertise “in advancing HP’s strategy across personal systems, print and 3D and driving sustainable, profitable growth and value creation.”

Xerox has proposed the following nominees:
• Betsy Atkins, former chair and CEO of Clear Standards, a software company;
• George Bickerstaff, co-founder and managing direct of M.M. Dillon & Co., a health care and technology boutique investment bank;
• Carolyn Byrd, chair and CEO of GlobalTech Financial;
• Jeannie Diefenderfer, an advisor who spent 28 years at Verizon;
• Kim Fennebresque, former chairwoman, president and CEO of Cowen Group;
• Carol Flaton, managing director at AlixPartners, a global consulting firm;
• Matthew Hart, former president and COO of Hilton Hotels;
• Fred Hochberg, former chairman and president of the Export-Import Bank of the U.S.;
• Jaco Katz, former chairman of Grant Thornton, a leading independent audit, tax and advisory firm;
• Nichelle Maynard-Elliott, who most recently served as executive director of mergers & acquisitions for Praxair; and
• Thomas Sabatino Jr., former executive vice president and general counsel of Aetna.

HP officials said its board would review the proposed Xerox nominees and respond “in due course.” The date of HP’s annual meeting has not yet been announced.
[email protected] / 585-653-4021
Follow Velvet Spicer on Twitter: @Velvet_Spicer