Please ensure Javascript is enabled for purposes of website accessibility

Xerox Throws in the Towel on HP Takeover Bid

By John Ballard - Apr 1, 2020 at 9:52AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Company cites the global health crisis and "resulting macroeconomic and market turmoil."

After pursuing a merger with HP (HPQ 0.20%) for months, Xerox Holdings (XRX) on Tuesday called off its proposal to acquire its rival. Xerox originally proposed the merger last fall but had been rejected by HP despite the backing of some shareholders of both companies. 

In a statement issued Tuesday, Xerox said, "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. ... While it is disappointing to take this step, we are prioritizing the health, safety and well-being of our employees, customers, partners and other stakeholders, and our broader response to the pandemic, over and above all other considerations." 

A woman working on a tablet computer with a printer sitting on a table.

Image source: Getty Images.

This isn't the time for debt

HP management had been against the deal, saying that Xerox was significantly undervaluing the business and that the combined company would create a highly leveraged balance sheet with too much debt. Xerox had secured financing for up to $24 billion in new debt to finance the acquisition of its larger rival. 

Before the recent downturn in the markets, HP stock had significantly outperformed Xerox over the last few years. But Xerox has made strides lately to improve margins and that had the shares drifting higher in recent months leading up to the market sell-off. 

It's unclear whether a deal could resurface later when the economy recovers. In the update issued on March 31, Xerox stated, "There remain compelling long-term financial and strategic benefits from combining Xerox and HP." 

John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

HP Inc. Stock Quote
HP Inc.
$34.29 (0.20%) $0.07
Xerox Corporation Stock Quote
Xerox Corporation

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.