The Board of Directors of Hewlett-Packard Inc. (HP) has unanimously rejected an acquisition bid by Xerox but has not completely shut down a possible merger between the companies.
In a letter sent to Xerox Vice Chairman and CEO John Visentin on Sunday, the HP Board of Directors rejected the acquisition offer because they felt it "significantly undervalued" the company.
Discussions about a possible acquisition of HP was started by the Xerox Board earlier this month. While HP is over three times the size of Xerox, the company said it was raising funds through the sale of various stakes in former parts of its business.
According to a Wall Street Journal report, Xerox is being backed by a major bank to receive lending for the transaction should the acquisition go through. An unsolicited acquisition proposal was submitted by Xerox to HP on November 5.
Xerox offered to acquire HP for $33.5 billion or $22 per share, which will comprise of $17 in cash and 0.137 in Xerox shares for each HP share. The offer values HP above its almost $30 billion market cap.
In the rejection letter, HP said: "Our Board of Directors has reviewed and considered your unsolicited proposal dated November 5, 2019 at a meeting with our financial and legal advisors and has unanimously concluded that it significantly undervalues HP and is not in the best interests of HP shareholders."
"The Board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company's stock," the company added. It also emphasized that it has "great confidence" in the company's strategy and ability to "continue driving sustainable long-term value."
However, HP's Board did not entirely shut down the possibility of a merger with Xerox. The HP Board said it recognizes "the potential benefits of consolidation" and is open to "exploring whether there is value to be created for HP shareholders through a potential combination with Xerox."
