Xerox has dropped its $34 billion deal to buy bigger rival HP, citing the current global health crisis related to the COVID-19 coronavirus.
“The current global health crisis and resulting macroeconomic and market turmoil caused by COVID-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP,” Xerox said in a statement on Tuesday.
Xerox will not nominate candidates to HP’s board, and has withdrawn its offer.
“We have a healthy cash position and balance sheet that enable us to navigate unanticipated challenges such as the global pandemic now before us, while preserving strategic optionality for the future,” HP said in a statement.
HP had rejected Xerox’s proposals. HP said that Xerox’s offer undervalued. HP disputed the $2 billion value of potential cost synergies that Xerox put forward in a possible combination. HP argued that its sale to Xerox would saddle the combined company with too much debt, and raised questions on the impact on Xerox’s supply chain of losing Fujifilm as a partner.
In February, Xerox raised its offer to $24 per share, which would value HP at about $34 billion. HP is a larger company and is more highly valued than Xerox.
The development is a setback for activist investor Carl Icahn, who owns 10.6 percent stake in Xerox and bought a $1.2 billion stake in HP last year.
It represents a victory for HP CEO Enrique Lores, who faced a takeover battle as soon as he took over the reins of the Palo Alto, California-based company in November. It reflects a defeat for Xerox CEO John Visentin, a former Hewlett-Packard and IBM executive with ties to the private equity industry who took over as Xerox CEO in 2018, CNBC reported.
HP acquired Samsung Electronics’s printer business for $1.05 billion in 2017. HP announced last year that it planned to cut between 7,000 and 9,000 jobs by the end of 2022 to save $1 billion per year.