U.S. printer maker Xerox Holdings Corp has made a roughly $33 billion cash-and-stock offer for personal computer maker HP Inc, a company more than three times its size, people familiar with the matter said on Wednesday. HP confirmed the bid, but declined to disclose the offer price. The companies have explored a combination from time to time, and HP will consider Xerox’s latest proposal “with an eye towards what is in the best interest of all our shareholders,” HP said in a statement.
Five days ago Enrique Lores, former president of HP’s imaging and printing business, officially took over as its chief executive. Xerox’s stock has rallied under CEO John Visentin, who took over last year and resolved a long-running dispute with joint venture partner Fujifilm Holdings Corp. Xerox said on Tuesday it would sell its 25% stake in the joint venture for $2.3 billion. Fujifilm agreed to drop a lawsuit against Xerox. With the dispute behind it and more cash in hand, Xerox set its sights on HP.
Xerox has offered to acquire HP for between $22 and $23 per share, to be paid in cash and stock, the sources said. To help fund the cash portion of the deal, Xerox has lined up financing from Citigroup Inc, the sources said. Xerox believes it can achieve at least $2 billion in annual cost synergies by creating an office technology supplies giant, one of the sources said. HP will spend a few days considering the offer before responding, another source added. The sources asked not to be identified because the matter is confidential.
Xerox and Citigroup did not respond to requests for comment. The Wall Street Journal first reported that Xerox was preparing a bid for HP. HP shares closed 6.4% higher at $19.57 in New York on Wednesday. Xerox shares rose 3.6% to $37.66, giving the company a market capitalization of $8.3 billion. Many analysts said there was merit in the companies combining to better cope with a stagnating printing market, but some cited challenges to integration, given their different offerings and pricing models.
“We would be left to question Xerox’s ability to finance such a large transaction and the potential overlap the two businesses would face,” Wells Fargo analysts wrote in a note. Xerox had scrapped its $6.1 billion deal to merge with Fujifilm last year under pressure from two major investors, Carl Icahn and Darwin Deason, who went on to overthrow its board.