Xerox Firms Up Financing for Bid to Take Over HP

By Cara Lombardo 

Xerox Corp. has secured financing for its takeover offer for HP Inc., according to people familiar with the matter, a sign the printer-and-copier company is pushing forward with an unsolicited $33 billion bid that its larger rival has resisted.

Citigroup Inc., Mizuho Financial Group Inc. and Bank of America Corp. have agreed to back Xerox by lending up to $24 billion, the people said.

Xerox on Nov. 5 made a cash-and-stock bid for HP, whose market value has since risen to almost $30 billion, making it nearly four times Xerox's size. HP rejected the bid as too low and not in the best interests of its shareholders. It also cast doubt on whether Xerox would be able to raise the cash portion and whether the combined company could handle the amount of debt it would likely require.

At the time of the bid, Xerox had only an informal funding pledge. The new commitments represent a vote of confidence by major financial institutions in the logic of the deal and the combined company's ability to generate adequate cash flow. It also underscores Xerox's desire to be the buyer in a potential combination, the people said, after some analysts have suggested it could be hoping for HP to buy it.

Xerox has argued the two companies, which both operate in the slowing printing industry, could yield cost savings of more than $2 billion by combining forces. They had previously discussed a tie-up but weren't in talks when Xerox offered $17 in cash and 0.137 of its shares for each HP share, or $22 a share.

While HP in its original rejection expressed a willingness to discuss a deal to combine with Xerox, the situation turned contentious when the two sides couldn't agree on terms to examine each others' businesses.

Activist investor Carl Icahn has stakes in both companies and supports a combination. After HP rejected Xerox's bid, Xerox said it would take its case directly to HP shareholders. The two sides have since been separately courting shareholders in an attempt to gain their support.

Should HP continue to be unreceptive, it is conceivable that Mr. Icahn or Xerox would launch a proxy fight at HP in the coming weeks.

Xerox primarily makes large printers and copy machines, while HP mainly sells smaller printers and printing supplies. HP is also one of the biggest PC makers in the world, though its printer business is more lucrative.

Both companies' stocks have remained elevated since The Wall Street Journal reported in November on Xerox's plans to make an offer, with HP's shares closing Friday at $20.53 and Xerox's closing Friday at $36.45.

Write to Cara Lombardo at [e-mail]

(END) Dow Jones Newswires

January 06, 2020 05:56 ET (10:56 GMT)

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