For months, Xerox (NYSE:XRX) has been in the hunt for HP Inc (NYSE:HPQ) -- still probably best known by its old name "Hewlett-Packard." In November, The Wall Street Journal first broke the story of how Xerox wanted to acquire its printer-maker rival, initially bidding about $33.5 billion --then raising that offer by about 10% earlier this month.
For its part, HP management has been at wit's end trying to figure out the best way to fend off Xerox's unwanted advances without offending its own shareholders who might appreciate the premium purchase price. Today HP struck upon its solution:
Instead of letting Xerox buy HP's shares, HP would buy them itself.
Immediately after reporting earnings for its fiscal first quarter 2020 (sales down a fraction of a percent year over year, earnings down 10% at $0.46 per share -- but free cash flow up 67%) HP announced that it will be putting all that free cash (and a bit more besides) to work through a massive share buyback.
HP closed trading Monday with its shares down 2.6%, and its market capitalization reduced to just $32.1 billion (down 5% over the past year). The buyback in question -- $15 billion in "total share repurchase authorization" -- therefore holds the potential to see HP take nearly half of its shares off the market.
Not all of these share repurchases will happen at once. Indeed, they might not all happen at all. But combined with an above-average dividend yield of 3.1%, HP says it plans to return a total of $16 billion in capital, in the form of buybacks and dividends combined, over the next three years -- and to effect $8 billion-worth of its promised repurchases within 12 months following its April 1, 2020 annual meeting.