Xerox Launches Proxy Fight for HP and Nominates Full 11-Director Slate -- Barrons.com
By Eric J. Savitz
Xerox Holdings this morning nominated a full 11-member slate for the HP Inc. board of directors, setting the stage for what is likely to be an ugly proxy contest for control of the iconic Palo Alto, Calif.--based PC and printer company.
HP (ticker: HPQ) has repeatedly rejected a recent $22-a-share takeover bid from Xerox (XRX) as too low.
"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 CEO John Visentin said in 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."
Xerox has asserted that a combination of the two companies would yield considerable cost synergies, although their product sets have limited overlap. Xerox makes enterprise-grade printers and copies, while HP is more focused on desktop printers, graphics printers, and PCs. HP also is developing a 3-D printing business. Both companies already have substantial cost-cutting plans in place.
So far, Xerox hasn't taken the additional step of making a tender offer for HP shares, although late last year it said had begun talking to HP shareholders to convince them to pressure the HP board to support the proposed combination. HP hasn't yet set the date of its 2020 annual meeting.
HP Thursday morning once again rejected the Xerox takeover offer. "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," the company said in a statement.
Here's a list of the 11 Xerox nominees:
-- Betsy Atkins. CEO of Baja Corp., a venture firm. Former CEO of Clear
Standards, acquired by SAP in 2009. Co-founder of Ascend Communications,
acquired by Lucent in 1999
-- George Bickerstaff. Managing Director, M.M. Dillon & Co., a boutique
investment bank. Former CFO, Novartis
-- Carolyn Byrd. CEO, GlobalTech Financial
-- Jeannie Diefenderfer. Former executive at Verizon Communications; CEO of
consulting firm consultingNpurpose.
-- Kim Fennebresque. Former CEO of Cowen Group
-- Carol Fenton. Former managing director, AlixPartners
-- Matthew Hart. Former CEO Hilton Hotels
-- Fred Hochberg. Former president of the Export-Import Bank of the United
-- Jacob Katz. Former chairman of Grant Thornton
-- Nichelle Maynard-Elliott: Former executive director of M&A at Praxair
-- Thomas Sabatino, Jr.: Former general counsel, Aetna
HP shares Thursday morning have inched slightly above the Xerox bid price, to $22.15. As Barron's noted yesterday , HP has other options to increase its share price -- one alternative would be to leverage up its balance sheet and repurchase a large number of shares.
It's also possible that Xerox could eventually increase its offer for HP, although that would likely require Xerox to secure even more financing beyond the $24 billion the company recently said it has secured to fund the cash portion of the traction.
The offer is for $17 a share, with the remainder in Xerox shares; increasing the number of the shares in the deal would likely boost the equity portion of the combined company that would be held by current HP holders above 50%.
Notably not included in the proposed slate is investor Carl Icahn, a Xerox board member who owns more than 10% of Xerox shares and more than 4% of HP shares. Also not included in the slate: anyone with experience in the printer business.
Xerox shares are down 0.3%, at $36.22, in recent trading. The S&P 500 is also down 0.3%.