HP Rejects Proposed Merger With Xerox
HP recently rejected a proposal from Xerox to merge the two companies.
The rejection stems from HP’s belief that it is being undervalued in the proposal and that there would be large levels of debt if the two companies were to merge.
“We recognize the potential benefits of consolidation and we are open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox,” said HP company officials in a letter to Xerox’s chief executive.
The merger would have cost Xerox $33.5 billion, pricing HP’s stock at $22 a share. The proposal would have paid $17 in cash for each share and covered the remaining cost in Xerox shares. Additionally, it was believed that the merger would have led to approximately $2 billion in cost savings.
Both companies have been focusing on cost cutting as their industries have suffered. There have been a decreased demand in printers as electronic document sharing has become more prevalent and as consumers become more aware of the environmental impact behind excessive printing.
HP’s current business model is satisfied with selling printers at a loss or breaking even since its revenue comes from replacement cartridges. Both companies are trying to establish themselves within the growing 3-D printing business.