HP warns of ‘disastrous’ M&A outcome in current climate

No time for talk as COVID-19 rolls on

HP has said it doesn’t want to divert its “valuable time, attention and resources” to a dialogue with Xerox about its proposed takeover bid amid the COVID-19 pandemic, stressing that any major mergers or acquisitions in the current climate could be “disastrous”.

HP president and CEO Enrique Lores and chairman Chip Bergh told shareholders in a joint letter dated 25 March that since Xerox first launched its unsolicited bid for the company, the global business climate has shifted dramatically -- a factor that does not appear to have lessened Xerox’s appetite to buy the company.

“Since Xerox launched its unsolicited exchange offer and nominated directors, the global social, economic and financial environments have changed radically. Despite this, Xerox continues to advance its tender offer and its proposed slate of directors in an effort to force a combination,” Lores and Bergh said.

“It is important for shareholders to understand that, under these circumstances and consistent with our fiduciary duties, we believe that we should not divert valuable time, attention and resources to a dialogue with Xerox about its proposed transaction. 

“Any complex, large-scale, highly leveraged transaction in the current economic environment could be disastrous for HP, its shareholders and our entire ecosystem. 

“While we remain open-minded about M&A [mergers and acquisitions] as a tool to add value for HP shareholders at the right time and on the right terms – it’s abundantly clear that now is not that time,” the pair said. 

Instead, the company is set to focus first and foremost on its business and work to address the needs of its ecosystem of over 250,000 partners, customers, 55,000 employees and other stakeholders around the world, according to Lores and Bergh.

“We are actively managing many challenges, including assuring the health and safety of our people, addressing supply chain disruptions, monitoring and addressing our customers’ liquidity needs and, more broadly, ensuring HP is well-positioned to support people working remotely,” the pair said.

“Our focus must now be on ensuring that we remain strong and resilient throughout this crisis while continuing to position the business for the opportunities ahead. 

“This includes continuing to advance our leadership in our core businesses and disrupting new industries with breakthrough innovation, while significantly reducing our costs to become a more agile company,” they said.