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The Xerox-HP takeover bid has been suspended due to the COVID-19 situation. Yesterday, Hewlett-Packard (HPQ) stock lost around 3% and today it is falling in the pre-market.
The story about the Xerox-HP hostile takeover has ended at least for now. Sources say that Xerox decided to pause its bid due to the current COVID-19 situation. Xerox has also declined to nominate board members to HP. Xerox had a takeover proposal for HP. This would have seen the two technology giants become a major combined force to reckon with on a global scale.
HP had rejected various offers by Xerox. Xerox raised the bid-offer for the merger to about $24 per share. This would have given HP a total valuation of $34 billion.
Yesterday, Hewlett-Packard (NYSE: HPQ) stock was at $ 17.36, falling by 2.69%. Today in the pre-market, it is falling further. Now it is at $16.99 (-2.13%).
Xerox-Hp Hostile Takeover Bid Slows Due to COVID-19
Xerox said in a statement that:
“The current global health crisis and resulting macroeconomic and market turmoil caused by COVID-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP Inc,”
HP indicated that it was in a comfortable cash position for its operations. The technology company noted:
“We have a healthy cash position and balance sheet that enable us to navigate unanticipated challenges such as the global pandemic now before us, while preserving strategic optionality for the future,”
While there is no love lost between both companies, HP seems to have been able to ward off attempts for now. The company had already indicated at the end of last year that it intended to cut between 7,000-9,000 jobs between now and 2022. This would create savings of about $1 billion for the technology giant.
Xerox had indicated that it was looking into developing synergies with Hp. In a statement, it had accused Hp of using delay tactics to stall the bid process.
Undue Investor Influence May Have Affected the Takeover
Sources say that veteran investor Carl Ichan was allegedly pushing for the merger. He also reportedly owns about 10.6% in Xerox and bought HP stock worth $1.2 billion. This kind of interest may not go down well with authorities as anti-trust regulators would have a field day ripping both boards apart o the issue.
While HP has been able to adapt to different kinds of business situations, Xerox’s profits have remained largely based on intellectual property royalties. The proposed merger had it gone through would have created a technology powerhouse. The new company would have competed favorably in the technology industry.
The coronavirus situation has been hostile to mergers and acquisitions. This is because the general business sentiment is negative. Demand for goods and services has fallen while stock prices have nosedived. Governments have instituted actions to create all forms of stimulus to keep the markets from crashing altogether.
While the Xerox-HP hostile takeover bid has been paused, for now, we may still see Xerox make another attempt after the COVID-19 situation ends.