HP has given its first indication that it is willing to open talks with Xerox at the same time as it embarks on an extensive buyback programme which could see $16bn returned to its shareholders over the next three years.
Xerox has been publicly angling to take control of its Californian rival for several months, but until now HP had consistently and firmly rebuffed all approaches. But speaking after the release of its first quarter results chief executive Enrique Lorres said, ‘We are willing to engage with them. It is not about who buys what, it is about creating value.’
HP had previously rejected Xerox’s overtures whilst publicly calling its New England-based rival a company of ‘questionable value’. Xerox responded by threatening to go directly to HP’s shareholders and trying to place its own people onto the latter’s board in order to force a deal through.
However HP’s confirmation that it intends to repurchase in the region of half its own market value in shares, financed through cash in hand and by taking on increased debt, indicates that it has little or no intention of allowing Xerox to be the dominant partner should any deal materialise. To further protect itself from any further takeover attempts HP has also unveiled a ‘poison pill’ plan which states that if anyone acquires 20% or more of its stock, HP will release heavily discounted stock onto the market.
Xerox responded by saying, ‘The HP board clearly adopted a poison pill because our offer is receiving overwhelming support from their shareholders. Despite the HP board’s intention to deny shareholders the chance to choose for themselves, we will press ahead with our previously announced tender offer and electing our slate of highly qualified director candidates.’
