HP Unleashes Poison Pill in Increasingly Tense M&A Battle with Xerox

Sticking to its guns about its ability to drive sustainable long-term value for shareholders, HP’s board of directors has adopted a shareholder rights plan and declared a dividend distribution of one preferred share purchase right on each outstanding share of HP common stock — a defense tactic in the business world known as a poison pill.

A company targeted for acquisition uses a poison pill to prevent or discourage an acquirer’s attempts at a hostile takeover by making the affected stock less attractive. The HP board adopted the rights plan following an announcement that Xerox intends to begin a tender offer to acquire all of the outstanding shares of HP common stock.

HP’s Chip Bergh

“HP’s board is focused on creating long-term value for HP shareholders. We believe it is essential that HP shareholders have sufficient time and full information when considering any tender off that Xerox may commence,” said Chip Bergh, chair of HP’s board of directors. “As we have previously said, we are very concerned about Xerox’s aggressive and rushed tactics, and any process that is not based on full information, is a threat to our shareholders.”

Xerox’s move to acquire printer giant HP began in November, and the two vendors have been engaged in increasingly negative and hostile communications ever since. Earlier this month, Xerox tried to sweeten its bid for HP by increasing its initial offer of $22 per share, to $24.

Xerox shot back about HP’s poison pill defense with the following statement:

“The HP board clearly adopted a poison pill because our offer is receiving overwhelming support from their shareholders. Regardless of what the company and its army of advisors announce Monday, we believe HP shareholders appreciate that the value we could create by combining Xerox and HP outweighs – and is incremental to – anything HP could achieve on its own. Despite the HP board’s intention to deny shareholders the chance to choose for themselves, we will press ahead with our previously announced tender offer and electing our slate of highly qualified director candidates.”

According to HP, the rights plan will not prevent a combination of HP with another business, but should encourage Xerox, or anyone seeking to acquire the company, to negotiate with the board prior to attempting to impose some combination that is not in the best interests of HP shareholders.

Expect to hear about HP’s plan to grow the company on Feb. 24, when it’s out of its quiet period.

In the meanwhile, HP announced earlier this week its continued efforts to fight cybercrime, which includes printers, PCs and other IoT endpoints, by joining the Buyers Labor (BLI) Security Validation Testing program for multifunction printers (MFPs) and printers. The vendor said that it was the first OEM to pass the test for device penetration, and the only OEM to pass the second test for policy compliance.