HP Says It Should Not Focus on Talks With Xerox Amid COVID-19 Pandemic

HP Inc. (HPQ) issued a letter to shareholders, saying it is focused on managing the COVID-19 pandemic “with urgency and a deep sense of care.” “Our primary responsibility in this difficult period is to focus on HP’s business and address the needs of our ecosystem of stakeholders around the world, including our shareholders, our millions of customers, our 250,000 partners, and our team of approximately 55,000 employees,” the company said.

“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.

At the same time, we are committed to protecting your investment in HP. Since Xerox (XRX) 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.

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 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. 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.”

HP aded in the letter that it has “consistently” expressed “deep concerns” about the capital structure that is reflect in Xerox’s proposal and that it is “important” for shareholders to understand that there would 6-12 months of “significant uncertainty” before knowing whether the conditions are satisfied.

“We believe the Xerox proposal fundamentally undervalues HP, threatens the future of both companies, and creates an unacceptable level of risk to both HP and Xerox shareholders,” HP said. Our duty now is to protect our organization – and your investment. And that’s exactly what we are going to do.”