The Wall Street Journal has reported that global print and digital company Xerox Holdings Corp. is considering the acquisition of its business partner and rival HP Inc. Described by the newspaper as a move that would “unite two fading stars of technology,” Xerox is reportedly contemplating making a cash-and-stock offer on HP equivalent to a market value of about $27 billion.
At this point, the deal is subject to speculation, with the WSJ citing “people familiar with the matter” as sources. There is no guarantee that a formal offer will be made, nor that it would be accepted. Any bid from Xerox would, however, come at a premium, and the company reportedly has an informal funding commitment from a major bank to support such an offer.
When approached for a response, an HP spokesperson told 3D Printing Industry, “We do not comment on rumors or speculation.”*
There is a clear disparity between the size of the companies, with HP reported as more than three times the size of Xerox. Additionally, so far for 2019, Xerox shares are up 84%, whereas HP shares were down 10% prior to today’s news. Pre-market trading activity in HP stock shows a 10% boost from the takeover speculation.
Potentially a counteroffer from HP could also emerge, though Xerox CEO John Visentin recently stated that there are no plans to sell the company following its decision to sell its stake in a joint venture with Fujifilm. A deal worth $2.3 billion.
As the market for paper printers has been in decline for sometime, printer manufacturers are considered ripe for consolidation. These same companies have also sought approaches to retain business. For both Xerox and HP this has included an investment in 3D printing. The parties also have a business relationship in place, which was expanded in June 2019.
3D printing at Xerox and HP
Founded in 1906 Xerox’s primary business is the sale of print and digital document products. As part of this offering, for the past 57 years, the company has been part of a joint venture with Fujifilm (Fuji Xerox). In January 2018, Fujifilm placed an offer to acquire Xerox. Rejecting the offer this year, Xerox instead opted to sell its 25% stake in the Fuji Xerox back to Fujifilm for an estimated $2.3 billion.
After much speculation, Xerox entered the 3D printing industry in February 2019, acquiring liquid metal jet 3D printer manufacturer Vader Systems. This followed a statement from the prior year from the company CEO that announced that Xerox was, “developing a roadmap to participate in 3D printing.”
Conversely, HP’s involvement in the 3D printing industry is well documented. The most recent Multi Jet Fusion release was the launch of the 5200 series 3D printers targeting volume production.
Xerox and HP have an existing business relationship in the laser printing sector. Expanded June this year, the relationship sees Xerox sourcing A4 and entry-level A3 printers from HP, and supplying toner for these printers and other HP products. In addition, the two companies have committed to launch a Device as a Service (DaaS) program. As part of this deal Xerox is authorized to sell HP PCs, displays and accessories. Xerox’s cloud-based content management platform DocuShare has also been made available on HP PCs.
For the most recent full fiscal year, ended October 2018, HP posted a revenue of more than $85 billion. The company has its Q4 2019 earnings call scheduled for November 26, 2019.
For the year ended December 31st 2017, Xerox posted revenue of $10.3 billion. The company recently released its third-quarter results for fiscal 2018 which were better-than-expected at $2.2 billion. As a result, the company raised its 2019 guidance for EPS and cash flow.
*HP backtracked on the stated policy of not commenting on “rumor or speculation” with this comment confirming a proposal has been received:
“As reviewed at HP’s most recent Securities Analyst Meeting, we have great confidence in our multi-year strategy and our ability to position the company for continued success in an evolving industry, particularly given the multiple levers available to drive value creation.
Against this backdrop, 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.
We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye towards what is in the best interest of all our shareholders.”
Xerox has been approached for comment on the news and how 3D printing is developing at the company.
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Featured image shows the HP voxel logo. Image via HP Inc.