HP: Xerox Hostile Takeover Bid Driven by Carl Icahn; Denounces Xerox Board Nominations

Responding to Xerox’s hostile takeover bid, on January 23rd, HP Inc. confirmed that Xerox has indeed announced its intent to nominate 11 candidates to stand for election to the HP Board of Directors at the HP’s 2020 Annual Meeting of Stockholders, which may be held this summer. For the first time, HP also directly referred to activist investor Carl Icahn (see below).

HP has twice rejected Xerox’s $33 billion cash-and-stock offer, which amounts to $22 per share, despite Xerox’s recent confirmation that it had lined up financing for the offer. Activist investor Carl Icahn, who holds stock in both Xerox and HP, has called the merger a “no-brainer.” Icahn would also likely profit handsomely if the merger went through, with one or both companies’ share prices  substantially rising. HP maintains that, among other things, the Xerox offer undervalues HP.

HP also released a statement blasting the Xerox nominations as 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 statement said that growth for HP is not dependent on a merger with Xerox, and that it has “numerous opportunities” to drive long-term growth without Xerox.

The statement also accused Xerox of seeking to acquire HP in order to take advantage of HP’s financial strengths:”Xerox’s proposed transaction attempts to use HP’s financial capacities for the benefit of Xerox shareholders.”

Targets Icahn

For the first time, HP directly referred to investor Icahn.  Icahn Enterprises is the majority shareholder in Xerox, and in 2018, Icahn’s efforts resulted in the replacement of nearly the entire Xerox board as well as its CEO, replacing Xerox management with Icahn loyalists. Icahn is a well-known corporate raider, and has a history of strong-arming companies and boards, forcing some to sell off parts in order to profit, but often to the long-term detriment of the company.

HP blasted Icahn in its statement, stating that it believes Xerox’s proposal and nominations are being driven by Icahn, and that his interests aren’t aligned with those of other HP shareholders, also noting: “Due to Mr. Icahn’s ownership position, he would disproportionately benefit from an acquisition of HP by Xerox at a price that undervalues HP.”

The statement also pointed out Icahn’s influence over Xerox and its board of directors, including Xerox CEO John Visentin:  “Mr. Icahn has meaningful influence over Xerox and its Board of Directors given his 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.”

HP concluded its statement by noting that it’s being advised by law firm Wachtell, Lipton, Rosen & Katz. As we’ve noted previously, there is said to be “years of bad blood” between Martin Lipton, a founding partner at the law firm, and Icahn. The law firm has helped clients such as Clorox and Dell fight back against Icahn, who it has called a “bullying corporate raider.”

Full Text of HP Statement

“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.

The HP Board of Directors is committed to serving the best interests of all HP shareholders and to pursuing the most value-creating path. Value creation for HP shareholders is not dependent on a Xerox combination. There are numerous opportunities available to HP to drive sustainable long-term value. These include the execution of HP’s strategic plan, and the deployment of its strong balance sheet for increased share repurchases of its significantly undervalued stock, and for value-creating M&A. Xerox’s proposed transaction attempts to use HP’s financial capacities for the benefit of Xerox shareholders.

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. Due to Mr. Icahn’s ownership position, he would disproportionately benefit from an acquisition of HP by Xerox at a price that undervalues HP.

Mr. Icahn has meaningful influence over Xerox and its Board of Directors given his 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 Board is unwavering in its commitment to HP shareholders and will continue to take all appropriate actions to advance and protect HP shareholders’ best interests.

About HP’s Board of Directors

HP benefits from an independent Board, including an independent Chairman and 10 of 12 independent directors, with the remaining members being the Company’s current and former CEOs.

HP’s Board includes world-class directors who bring relevant skills and proven experience in advancing HP’s strategy across personal systems, print and 3D, and driving sustainable, profitable growth and value creation. This expertise includes:

  • Developing and implementing cost cutting plans to support both profitable growth and brand competitiveness in global markets as demonstrated by HP’s performance over the past three years, which includes $10.5 billion in revenue growth and $12.9 billion in cumulative cash flow from operations;
  • Evaluating and executing strategic mergers and acquisitions, including successfully overseeing complex integrations, including the Samsung printing business consolidation transaction;
  • Assessing capital allocation opportunities to maximize returns;
  • Developing disruptive technology and driving innovation across the consumer and enterprise technology landscape; and
  • Serving in executive leadership and corporate operating and strategic development roles for other large, global companies, including six current or former CEOs.

HP’s highly qualified directors also have experience in finance and accounting; government and public affairs; scientific research, product development and issues management; corporate governance; and international business in key regions where HP operates around the world.

The HP Board will review the proposed Xerox nominees, and respond in due course. Additional information regarding the HP Board and its recommended slate of director nominees will be presented in the Company’s definitive proxy statement and other materials, to be filed with the U.S. Securities and Exchange Commission and mailed to all shareholders eligible to vote at the 2020 Annual Meeting. The date of the 2020 Annual Meeting has not yet been announced. HP shareholders are not required to take action at this time.”

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