HP rejects Xerox offer, but door open

HP’s board of directors rejected on Sunday an acquisition offer from Xerox from early November, while leaving the door open for any modified proposal that offers its shareholders better value.

The initial merger proposal had the endorsement of billionaire Carl Icahn who took control of the Xerox board last year after a proxy battle. Xerox CEO John Visentin worked at HP earlier in his career.

HP recently installed Enrique Lores as CEO after Dion Weisler stepped down after four years at the helm. Weisler led HP on the heels of it splitting into two entities, with HP retaining its historic personal computer and printer operations and spinning off Hewlett Packard Enterprise, which sells servers, software and other “bigdata” systems.

With reports valuing Xerox’s initial offer at $33 billion, any merger could be the largest in the U.S. hightech industry since 2015 when Dell fused with the storage computing giant EMC, with the combined company based in Hopkinton, Mass., where EMC had its roots.

In a jointly signed letter to Visentin on Sunday, Bergh and Lores stated the initial Xerox proposal undervalues HP and would require any combined company to carry “outsized” debt levels, but asked for “substantive engagement from Xerox management” as HP explores further any possible deal.

“We recognize the potential benefits of consolidation, and we are open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox,” Bergh and Lores stated in the letter to Visentin. “However, as we have previously shared in connection with our prior requests for diligence, we have fundamental questions that need to be addressed in our diligence of Xerox. We note the decline of Xerox’s revenue ... since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects.”

For Norwalk and by extension the state of Connecticut, the key question is the location of any combined company’s headquarters, with a spokesperson not responding immediately Monday in response to a query on its plans. As of 2018, the city of Palo Alto, Calif. listed HP’s headquarters staff count at 2,500 people.

Xerox recommitted in 2017 to keeping its headquarters in Norwalk, getting state incentives of $4.4 million to maintain a workforce of between 150 and 190 people.

The year before, Connecticut enacted a new tax policy dubbed unitary combined reporting that allows the state to tax a portion of the income of corporations regardless of their state of domicile, based on levels of economic activities within Connecticut’s borders. California likewise has a unitary combined reporting requirement on the books.

Associated Press file photo HP Chairman Chip Bergh, left, during a March initial public offering of stock for Levi Strauss, where he is CEO.