This makes no sense. It has to be a play to try and prop-up Xerox’s stock above $40 a share (Icahn’s & Deason’s stated goal) to try and sell the company.
Xerox’s share price is $36.37 as of today with a market cap of $8.15 Billion and revenues of $9.23 Million (a number many of us doubt). HP has a share price of $20.67 as of today a market cap of $29.53 Million, which is 3.6 times the size of Xerox, and revenues of $58.72 Million, which is 6.4 times Xerox’s revenue. In addition, Xerox has $922 M in cash and $5.15 B in Debt ($101.1 Debt to Cash ratio) and a rating of Baa3 (Moody’s December 2018) while HP has $4.92 B in cash (5x Xerox) and $5.06 B in debt (less than Xerox) for a ratio of $1.03 and a slightly better debt ratio of Baa2 (Moody’s September 2018).
Simply stated, even with $2.3 B from Fuji Film for Xerox’s share of FujiXerox, companies of Xerox’s size do not buy companies of HP’s size unless the bigger company is literally is on the verge of or already in bankruptcy (US Air buying American for example). In addition, while Xerox would buy HP, the employees of HP, even after their proposed job cuts of 7K to 9K (of 55,000) would have to run the new organization as Xerox has no one left to run a company of Xerox’s size, never mind the size of the combined firms. Maybe the former HP executives within Xerox today know something that we don’t? The one part I do agree is that this would have to be a cash and stock deal as neither company has the ability to raise enough viable debt to make this work. Overall, if this story is true and move forward, to make the numbers work, it’s going to take a deal that is so complex that it will make the proposed FujiXerox acquisition of Xerox look as easy as baking brownies from a pre-made mix.