Probably was never going to happen but given the current world circumstances it's best to back away.
https://www.businessinsider.com/xerox-hp-ending-hostile-takeover-bid-2020-3
15 replies (most recent on top)
Endeavor was a colossal waste of time from the start. Time we could have focused on real innovation; home grown ventilator tech vs publicity stunt... Blockbuster Video, Kodak... Xerox.
@4yze+14fa4XRk very good observations and well stated. I agree.
Temperamental cut and paste option, the last paragraph should read...
Now, Xerox has simply run out of time. The share price had already slid to about $32.00 after HP pushed back before the entire market fell apart in March. It now rests at about $17.50, which is a 45% drop in comparison to the 20% drop experienced by the S&P 500. The bankers sobered-up and walked away to focus on the pending flood of personal, mortgage, and small business loan defaults. HP. Like everyone else, is going to be focused on its own survival now and does not have the interest nor the ability to buy Xerox. Carl is not getting his $40.00 a share. Best guess based on his history is that he will wash his hands of this losing bet by forcing the company in bankruptcy, especially with a major debt offering due in 2021, and then sell-off whatever assets he can.
Icahn promised his cabal that Xerox would be sold for $40 a share and that it could be done fast. That is what everything has been about.
At first, he believed he could achieve that number by through a massive cost cutting effort, i.e. Project Own It, which has been his operating model for decades, and then plowing those savings plus the 2017 tax break savings into stock buybacks to generate the magic cash flow and p/e numbers that the Street loves. But he made two mistakes. First, Xerox has been going through cost cutting for years and the only ‘fat’ left for him to cut was in R&D, basic operations, and people. Sure, cutting those critical assets saved a lot of money in the short-term; but left nothing for the company to grow from in the future. Second, he let the battle over Fuji become too personal. He may have beaten Jacobson; but his ego battle with Komori at Fuji led to the end of a 60 year-old joint venture that provided Xerox with a large portion of its R&D capabilities, nearly all of its sales in the critical Asia Pac market, and close to half of its manufacturing capabilities. All of that effort got the company’s stock price to about $36.40 by July ’19, which was not $40, and, ironically, just 5% higher than the share price’s peak of $34.50 under Jacobson when the Fuji deal was announced. I bet that really irritated Carl.
After that 18-month effort failed (Icahn is not known for a long attention span), the Xerox leadership knew that the company had no future with all of the internal cuts made and the pending loss of the FX joint venture. So, they went for broke. They sold Fuji Xerox to Fuji for $2.3 Billion (it may have been worth closer to $4.0 Billion) and took advantage of low interest rates and inflated stock prices to cajole bankers for $24 Billion in financing (what bank in their right mind loans that much money to a company’s whose bonds are already ‘junk’ and is facing severe market headwinds?) to buy HP, or, more likely push HP to buy Xerox. Icahn made several mistakes here though. First, after JV tried talking HP into buying Xerox initially, Icahn raised alarms when he began to quietly buy HP stock after those talks collapsed. Second, his instance that no matter how a merge between HP and Xerox worked out that ‘his’ Xerox leadership team be the ones in charge of the combined firm effectively united HP executives and a number of important key stakeholder against Xerox. They saw the Xerox C-Suite as a collection of former HP executives who had already been cast-off for failing to fix HP before and whose loyalty to Icahn would likely mean the end of HP. Third, looking at Xerox’s operational, cash flow, and debt numbers, even the Wall Street had no idea how Xerox could successfully buy HP. All of that huffing and puffing got Xerox’s share price to about $39.00 in Nov ’18 when the deal was announced and another bump to $37.80 in Jan ’20 when the drunk bankers got in line. Still no $40.00 a share.
focus on a pending flood of personal, mortgage, and small business defaults. HP. Like everyone else, is going to be focused on its own survival now and does not have the interest nor the ability to buy Xerox. Carl is not getting his $40.00 a share. Best guess based on his history is that he will wash his hands of this losing bet by forcing the company in bankruptcy, especially with a major debt offering due in 2021, and then sell-off whatever assets he can.
makes no sense now
Johnny V and the boys are losers. Now they can be cash out on the nickels and dimes left.
Don't assume an acquirer will be a savior.
The only way there is a chance of positive outcome is if i-con and his goons move to other prey asap and after that, more upper level housecleaning is needed by someone who knows to run a tech business SUCCESSFULLY.
What Xerox needs:
1) to get acquired and go private
2) to get rid of current leadership team. Item 1 above can help guarantee this if the buyer has a clue
What Xerox doesn’t need:
3) to chase stock price and “shareholder value”. Shareholders who are hoodwinked by investor presentations and dont drill down deserve what they get.
4) a leadership team that misrepresents so much to employees, the press, and the market.
5) a shell game annuity model that is unraveling before us
Icahn lost a bundle of money when the stock market took a southward turn. I doubt very much if he can afford to buy much of anything right now.
At least HP has a future.
Slapping two bricks together doesn't make you a lifeboat!
The WSJ article: https://www.wsj.com/articles/xerox-to-end-hostile-takeover-bid-for-hp-11585684800
Follow the playbook, HP stock is on sale for Icahn. He can buy enough stock to increase his share below 20% threshold, my guess is he will target 8-12% and cozy up to a secondary major stock holder to get his people elected to the board of directors. Then follow the bouncing ball. Out goes HP CEO, existing HP board members and dont blink Xerox buys HP from a friendly board.
Anyone want to place a bet on Xerox's next move? The last line of the article provides some insight:
"The printing industry has been declining ....... leaving the companies little choice but to focus on paring costs."
Interesting. No we will see if Xerox decides to go it alone, or Perhaps looking to get bought by HP in a more friendly way?