{"id":38599,"date":"2020-02-27T12:06:09","date_gmt":"2020-02-27T20:06:09","guid":{"rendered":"https:\/\/www.enxmag.com\/twii\/?p=38599"},"modified":"2020-02-27T12:06:11","modified_gmt":"2020-02-27T20:06:11","slug":"hp-offers-value-creating-plan-that-doesnt-include-xerox-but-open-to-exploring-combination","status":"publish","type":"post","link":"https:\/\/www.enxmag.com\/twii\/the-week-in-imaging-twii\/editors-blog\/2020\/02\/hp-offers-value-creating-plan-that-doesnt-include-xerox-but-open-to-exploring-combination\/","title":{"rendered":"HP Offers Value-Creating Plan that Doesn\u2019t Include Xerox, but Open to Exploring Combination"},"content":{"rendered":"\n<div class=\"wp-block-image\"><figure class=\"alignleft\"><img loading=\"lazy\" width=\"300\" height=\"186\" src=\"https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2020\/02\/bull-moose-1550265_1280-300x186.jpg\" alt=\"\" class=\"wp-image-38600\" srcset=\"https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2020\/02\/bull-moose-1550265_1280-300x186.jpg 300w, https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2020\/02\/bull-moose-1550265_1280-768x476.jpg 768w, https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2020\/02\/bull-moose-1550265_1280-1024x635.jpg 1024w, https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2020\/02\/bull-moose-1550265_1280.jpg 1280w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/figure><\/div>\n\n\n\n<p>In tandem with its Q1 2020 earnings report, Palo Alto,\nCalifornia-based HP rolled out a strategic and financial value creation plan\nthat does not envision a union with Xerox. But it doesn\u2019t completely close the\ndoor on Xerox CEO John Visentin and maverick shareholder Carl Icahn, despite\nHP\u2019s adoption of the poison pill strategy late last week. <\/p>\n\n\n\n<p>What Monday\u2019s release essentially does say is that the acquisition vehicle Xerox has proffered to HP and its shareholders is fundamentally flawed. <\/p>\n\n\n\n<p><strong>Poison Pill Strategy<\/strong><\/p>\n\n\n\n<p>HP\u2019s current positioning took form late last week, when the\ncompany said it would implement a poison pill plan lasting one year. This\nstockholder rights plan is devised to prevent investors from accruing more than\na 20% stake in the company.<\/p>\n\n\n\n<p>\u201cThe rights will not prevent a combination of HP with\nanother business, but should encourage Xerox (or anyone else seeking to acquire\nthe company) to negotiate with the board prior to attempting to impose some\ncombination that is not in the best interests of the HP shareholders,\u201d HP explained\nin a statement.<\/p>\n\n\n\n<p>Xerox was anything but nonplussed following the\nannouncement. \u201cThe HP board clearly adopted a poison pill because our offer is\nreceiving overwhelming support from their shareholders. Regardless of what the\ncompany and its army of advisors announce Monday, we believe HP shareholders\nappreciate that the value we could create by combining Xerox and HP outweighs\u2014and\nis incremental to\u2014anything HP could achieve on its own. Despite the HP board\u2019s\nintention to deny shareholders the chance to choose for themselves, we will\npress ahead with our previously announced tender offer and electing our slate\nof highly qualified director candidates.\u201d<\/p>\n\n\n\n<p>On Monday, HP and its \u201carmy of advisors\u201d delivered a crushing blow to Xerox\u2019s latest proposal increase of $2 per share with a laundry list of flaws it sees in the proposition, punctuated with a multi-year strategic and financial value creation plan that anticipates generating up to $5.1 billion of non-GAAP operating value in fiscal 2022. On the first point, while HP acknowledges the value industry consolidation can provide, as evidenced by its 2017 acquisition of Samsung\u2019s printing business, it felt Xerox\u2019s revamped offer \u201cmeaningfully undervalues HP, creates significant risk and compromises HP\u2019s future.\u201d<\/p>\n\n\n\n<p><strong>Proposal Flaws<\/strong><\/p>\n\n\n\n<p>The company cited three main talking points in its assessment of\nthe Xerox bid, believing the proposal:<\/p>\n\n\n\n<ul><li>Exchanges HP stock for cash and Xerox stock at a fundamentally flawed value exchange that does not compensate HP shareholders for the value of HP executing on its strategic plan and transfers value from HP shareholders to Xerox shareholders;<\/li><li>Uses HP\u2019s balance sheet as transaction consideration and creates an irresponsible capital structure that would jeopardize the future value of the combined company and constrain its ability to invest in growth and innovation; and<\/li><li>Overstates the potential synergies by including HP\u2019s existing plans for independent cost reductions and productivity gains.<\/li><\/ul>\n\n\n\n<p>HP also indicated it is reaching out to Xerox to \u201cexplore if there\nis a combination that creates value for HP\nshareholders that is additive to HP\u2019s strategic and financial plan.\u201d This could\ntranslate as HP CEO Enrique Lores and Board Chair Chip Bergh preferring to set\nthe tone for the terms, as well as which company will play the lead role in a\ncombination.<\/p>\n\n\n\n<p>In addition to the $3.25-$3.65\nEPS promise in 2022, HP also announced a $15 billion share repurchase\nauthorization program, with at least $8 billion in share repurchase within 12\nmonths. The company is also targeting $16 billion capital return planned over\nthree years, which represents roughly 50% of HP\u2019s current market\ncapitalization.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignright\"><img loading=\"lazy\" width=\"200\" height=\"200\" src=\"https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2018\/08\/enrique-lores_tcm_245_2100574.jpg\" alt=\"\" class=\"wp-image-30433\" srcset=\"https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2018\/08\/enrique-lores_tcm_245_2100574.jpg 200w, https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2018\/08\/enrique-lores_tcm_245_2100574-150x150.jpg 150w, https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2018\/08\/enrique-lores_tcm_245_2100574-380x380.jpg 380w\" sizes=\"(max-width: 200px) 100vw, 200px\" \/><figcaption>Enrique Lores, HP<\/figcaption><\/figure><\/div>\n\n\n\n<p>\u201cHP is out of the gate strong in\nQ1, with outstanding earnings and a robust plan to create significant value for\nshareholders,\u201d Lores said. \u201cOur three-year financial targets reflect a company\nat the top of its game, combining the industry\u2019s best innovation with\ndisciplined cost management and aggressive capital returns to support a\ncompelling investment in both the short and long term.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In tandem with its Q1 2020 earnings report, Palo Alto, California-based HP rolled out a strategic and financial value creation plan that does not envision a union with Xerox. But it doesn\u2019t completely close the door on Xerox CEO John Visentin and maverick shareholder Carl Icahn, despite HP\u2019s adoption of the poison pill strategy late last week. What Monday\u2019s release essentially does say is that the acquisition vehicle Xerox has proffered to HP and its shareholders is fundamentally flawed. Poison Pill Strategy HP\u2019s current positioning took form late last week, when the company said it would implement a poison pill plan lasting one year. This stockholder rights plan is devised to prevent investors from accruing more than a 20% stake in the company. \u201cThe rights will not prevent a combination of HP with another business, but should encourage Xerox (or anyone else seeking to acquire the company) to negotiate with the board prior to attempting to impose some combination that is not in the best interests of the HP shareholders,\u201d HP explained in a statement. Xerox was anything but nonplussed following the announcement. \u201cThe HP board clearly adopted a poison pill because our offer is receiving overwhelming support from their shareholders. Regardless of what the company and its army of advisors announce Monday, we believe HP shareholders appreciate that the value we could create by combining Xerox and HP outweighs\u2014and is incremental to\u2014anything HP could achieve on its own. Despite the HP board\u2019s intention to deny shareholders the chance to choose for themselves, we will press ahead with our previously announced tender offer and electing our slate of highly qualified director candidates.\u201d On Monday, HP and its \u201carmy of advisors\u201d delivered a crushing blow to Xerox\u2019s latest proposal increase of $2 per share with a laundry list of flaws it sees in the proposition, punctuated with a multi-year strategic and financial value creation plan that anticipates generating up to $5.1 billion of non-GAAP operating value in fiscal 2022. On the first point, while HP acknowledges the value industry consolidation can provide, as evidenced by its 2017 acquisition of Samsung\u2019s printing business, it felt Xerox\u2019s revamped offer \u201cmeaningfully undervalues HP, creates significant risk and compromises HP\u2019s future.\u201d Proposal Flaws The company cited three main talking points in its assessment of the Xerox bid, believing the proposal: Exchanges HP stock for cash and Xerox stock at a fundamentally flawed value exchange that does not compensate HP shareholders for the value of HP executing on its strategic plan and transfers value from HP shareholders to Xerox shareholders; Uses HP\u2019s balance sheet as transaction consideration and creates an irresponsible capital structure that would jeopardize the future value of the combined company and constrain its ability to invest in growth and innovation; and Overstates the potential synergies by including HP\u2019s existing plans for independent cost reductions and productivity gains. HP also indicated it is reaching out to Xerox to \u201cexplore if there is a combination that creates value for HP shareholders that is additive to HP\u2019s strategic and financial plan.\u201d This could translate as HP CEO Enrique Lores and Board Chair Chip Bergh preferring to set the tone for the terms, as well as which company will play the lead role in a combination. In addition to the $3.25-$3.65 EPS promise in 2022, HP also announced a $15 billion share repurchase authorization program, with at least $8 billion in share repurchase within 12 months. The company is also targeting $16 billion capital return planned over three years, which represents roughly 50% of HP\u2019s current market capitalization. \u201cHP is out of the gate strong in Q1, with outstanding earnings and a robust plan to create significant value for shareholders,\u201d Lores said. \u201cOur three-year financial targets reflect a company at the top of its game, combining the industry\u2019s best innovation with disciplined cost management and aggressive capital returns to support a compelling investment in both the short and long term.\u201d<\/p>\n","protected":false},"author":166,"featured_media":38600,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[80,1650,82,1638],"tags":[203],"_links":{"self":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/38599"}],"collection":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/users\/166"}],"replies":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/comments?post=38599"}],"version-history":[{"count":1,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/38599\/revisions"}],"predecessor-version":[{"id":38601,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/38599\/revisions\/38601"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media\/38600"}],"wp:attachment":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media?parent=38599"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/categories?post=38599"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/tags?post=38599"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}