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Xerox Confirms HP Takeover Bid: Industry ‘Long Overdue’ For Consolidation

‘This looks to me like Xerox trying to strong-arm HP even though HP has been successful in a major separation from HPE (Hewlett Packard Enterprise) that has reinvented and re-energized HP,’ says one solution provider.

Xerox is trying to create value for shareholders and “move first” in an industry “long overdue for consolidation,” the company said in its first public statement since making a takeover offer for HP Inc.

“Our industry is long overdue for consolidation, and those who move first will have a distinct advantage,” the company said in a statement Thursday afternoon. “We look forward to expeditiously moving this process forward and creating additional value for shareholders.”

[RELATED: 5 Things To Know About A Potential Xerox-HP Deal: ‘The Copier King And The Printer King Combined’]

Xerox, in effect, for the first time publicly confirmed the takeover bid for HP with the statement on consolidation and moving “this process” forward.

CNBC has reported the Xerox bid to buy HP at $22 a share in a cash and stock offer that would give HP shareholders 48 percent stake in the new combined enterprise.

The bid, which consists of 77 percent cash, and 23 percent stock, according to CNBC, is $2 higher than HP’s share price Thursday morning when it traded at 19.98, and it is 23 percent higher than where HP shares started the month at $17.78.

Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 101 on the CRN 2019 SP500, called the Xerox statement nothing short of saber-rattling rhetoric that ignores the economic realities of HP weighing in as a $58 billion goliath with a prominent position in the healthy PC market compared to Xerox’s $9.83 billion in a declining printer market.

“This looks to me like Xerox trying to strong-arm HP even though HP has been successful in a major separation from HPE (Hewlett Packard Enterprise) that has reinvented and re-energized HP,” he said. “This is rhetoric to either boost their stock or cause turmoil in the market and in the PC, printer and copier industries.”

Venero said the health of the PC market has consistently been undervalued. “The PC is the view into the cloud and is more alive than ever,” he said. “The PC is one of the enablers of the cloud. Making a statement that the industry is long overdue for consolidation doesn’t recognize the value of the PC business.”

Venero -- who is a Xerox and HP partner -- is hoping that HP can fend off the Xerox bid. He said consolidation would not benefit businesses, consumer or partners.

“A lot of time when an industry consolidates it is the worst thing that could happen for businesses and consumers,” he said, noting his HP sales are up significantly since its split from HPE. “When you have consolidation you don’t have to innovate or differentiate.”

For the channel specifically, Venero said consolidation would destroy long standing and valued relationships with the separate HP and Xerox teams and lead to “turmoil and dysfunction” in the sales trenches.

HP on Wednesday night confirmed reports that it had received a buyout proposal from Xerox and said they have had previous conversations with the company about “a potential business combination.

“We have had conversations with Xerox Holdings Corporation (NYSE: XRX) from time to time about a potential business combination. We have considered, among other things, what would be required to merit a transaction. Most recently, we received a proposal transmitted yesterday.”

HP has said it has confidence in its multi-year strategy as well as its ability to “position the company for continued success in an evolving industry.”

That said, HP recently announced it was eliminating between 7,000 and 9,000 jobs in an attempt to save $1 billion by 2020. The company is also overhauling how it priced its printers in the hopes of staving off competition from third-party ink and toner suppliers.

Both company’s share prices surged Wednesday on news first reported by the Wall Street Journal that Xerox had offered to buy the company. Subsequent reports said the copier kingpin offered HP less than $23 a share in a cash and stock transaction that would be financed via a loan from Citi.

Venero said, for his part, said regardless of the terms there have been many cases when megadeals have failed and were later walked back including Symantec’s $13. 5 billion acquisition of Veritas in 2015 and Intel’s $7.6 billion acquisition of McAfee in 2010. In 2016, Symantec sold off Veritas and Intel sold McAfee. “Historically there have been many megadeals that did not bear fruit,” he said.

Ultimately, Venero said, he sees Xerox as David in a battle against HP as the goliath. “In this case, I think Goliath is going to remain standing,” he said.

Additional reporting by Steven Burke.

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