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The HP-Xerox 'Frenemy' take-over battle in a nutshell - Andy McCourt

I've been watching the events unfold between HP,  Xerox and Fujifilm/Fuji Xerox and there can be no doubt that a major realignment of our industry's digital supply chains is going to happen, it's just a matter of when. HP's latest letter to Xerox was short and to the point. Only 'No way' would have been briefer. Using this as an example, here's a short digest of the status quo, with a little op-ed.

It's like Stefano Craig's rap song 'Frenemies' image credit: Shazam


  • HP's  January 8th letter in response to Xerox's - where it boasted that it had USD$24 billion in available (unsecured) finance plus a USD$4.5 billion 'cash-flow bridging loan' - was short and to the point. Addressed to Xerox CEO John Visentin, it said:

Dear John,

We reiterate that the HP Board of Directors’ focus is on driving sustainable long-term value for HP shareholders. Your letter dated January 6, 2020 regarding financing does not address the key issue – that Xerox’s proposal significantly undervalues HP – and is not a basis for discussion. The HP Board of Directors remains committed to advancing the best interests of all HP shareholders and to pursuing the most value-creating opportunities.

On behalf of the Board of Directors,

Enrique Lores and Chip Bergh


- Talks have occurred between the two imaging giants but turned hostile last November when the HP directors wrote back to Xerox saying: "You failed to address them (questions about Xerox) and instead walked away, choosing to pursue a hostile approach rather than continue down a more productive path,”

- The main driver of all this is 'shareholder activist' (some say corporate raider), Carl Icahn, who happens to own around 11% of Xerox and 4.3% of HP. He has a track record of making millions or billions from acquiring companies, putting his own board in place and then extracting maximum value by cutting costs, selling off assets, loading them up with debt and firing workforces. He does not have such a great track record in running businesses - take TWA for example.

- Xerox has offered to buy HP (including HP Indigo), for USD$33 billion and says it has secured $24 billion in financing from 3 banks plus $4.5 billion as a bridging loan. $4.5 billion is about the same as HP holds in cash reserves. Presumably, the balance of the $33 billion is to be paid in Xerox shares. At this offer, Xerox would have 52% - and therefore control - of HP.

- Xerox is a much smaller company than HP. Some analysts believe that the ploy is to force HP to bid for Xerox to get the problem out of the way.

- US-based analyst Therese Poletti of marketwatch sums the situation up neatly with: "Wall Street is a betting culture, and with his track record, it may be foolish to bet against Icahn & Co. in a proxy fight. But if HP investors are confident in HP’s current management team, they should tell Xerox and Icahn to buzz off with their current pitch. The big question, though, may ultimately be who acquires who, and which company will be leading the way."

- Meanwhile, the joint venture between Xerox and Fujifilm - Fuji Xerox - is over with Fujifilm buying the 25% of the j.v. that it didn't already own. Fuji Xerox will eventually re-brand and plot its own path in Asia-Pacific, but may still supply Xerox with key technologies.

That's where we are at for the moment...this will take a while to reach a conclusion and for sure there will be many twists and turns along the way. Hopefully customers of the two antagonists will not be disadvantaged. With Fujifilm at the helm locally, customers of Fuji Xerox with Fujifilm-built equipment should be well looked after but, as our survey last November showed, there is deep concern amongst HP Indigo and wide format customers should the 'Xerox culture' change HP to its detriment.