Xerox (XRX) on Tuesday said it would reach out to HP (HPQ) shareholders directly after the computer maker’s board rejected its $33.5 billion bid.
Palo Alto, Calif.-based HP over the weekend rejected the Xerox’s offer of $22 per share in cash and stock, saying in letter dated Sunday that the offer “significantly undervalues HP.”
Also, HP said it was there were concerns about how Xerox would be able to fund the offer and the debt burden of a combined company if the deal went through.
HP, as of Tuesday afternoon, had a market capitalization of $29.4 billion, far above Xerox’s $8.4 billion. HP shares were 1.6% lower in afternoon trading while Xerox had retreated 0.1%.
In his letter to HP’s leadership, Xerox Chief Executive John Visentin denied his company offer was “highly conditional” or “uncertain,” saying “the combined company is expected to have an investment grade credit rating.”
“The potential benefits of a combination between HP and Xerox are self-evident,” he said. “Together, we could create an industry leader — with enhanced scale and best-in class offerings across a complete product portfolio — that will be positioned to invest more in innovation and generate greater returns for shareholders.”
Visentin said Xerox has been approached by “several HP shareholders,” and it is “encouraged” from their interest in the offer.
Activist investor Carl Icahn told the Wall Street Journal earlier this month that he has acquired a 4.4% stake in HP and told the newspaper that a tie-up with Xerox is “a no-brainer.” Icahn also owns nearly 11% of Xerox.
Xerox earlier this month sold off its stake in its 57-year-old joint venture with Fujifilm to the Japanese company for $2.3 billion, saying it would use the proceeds from the deal to fund acquisitions, return capital to shareholders, and pay down debt.