This is not the first time that activist investor Carl Icahn has tried to orchestrate a deal by having a relatively smaller company buy a bigger one.
According to three sources familiar with the matter at hand, U.S. printer maker Xerox Holdings Corp has made a $33 billion cash-and-stock offer to acquire personal computer maker HP Inc.
Although HP confirmed Xerox’s bid, it however declined to disclose the offer price.
In the past, both companies have explored a merger avenues, and HP will consider Xerox’s latest proposal “with an eye towards what is in the best interest of all our shareholders,” said HP in a statement.
Xerox under CEO John Visentin, who took over in 2018, resolved a long-running dispute with joint venture partner Fujifilm Holdings Corp. On Tuesday, Xerox had said it would sell its 25% stake in the Fujifilm joint venture for $2.3 billion to which the latter agreed.
Fujifilm has also agreed to drop a lawsuit against Xerox.
Now with the dispute with Fujifilm settled and with more cash in hand, Xerox has set its sights on HP.
According to sources, Xerox has offered to acquire HP for between $22 and $23 per share, which will be paid in cash and stock, said sources. To help fund the cash portion of the deal, Xerox has lined up financing from Citigroup Inc, said sources.
They went up to add, Xerox believes it can achieve at least $2 billion in annual cost synergies by creating an office technology supplies giant.
HP will spend a few days considering the offer before responding, said a source.
Sources preferred the cover of anonymity since the matter is confidential.
Xerox and Citigroup did not respond to requests for comment.
According to analysts, the merger has synergy as it will help the combined company to better cope with a stagnating printing market; however many analysts have cited challenges in integrating both companies given their pricing models and different offerings.
“We would be left to question Xerox’s ability to finance such a large transaction and the potential overlap the two businesses would face,” wrote Wells Fargo analysts in a note.