Xerox is reportedly mulling a blockbuster takeover of HP
- Xerox is considering a takeover bid for computer company HP, the Wall Street Journal reported Tuesday evening.
- HP shares spiked as much as 8% on the news.
- Xerox's board discussed the option Tuesday. HP is more than three times Xerox's size, and an offer would ring in at a premium to HP's $27 billion market value.
- The copy machine company expects a $2.3 billion payment from selling stakes in joint businesses to Fujifilm, and has already received and informal commitment from a major bank to fund such a deal.
- Watch HP trade live here.
Copy machine maker Xerox is considering a takeover of HP, The Wall Street Journal reported Tuesday evening.
HP's shares spiked 8% on the news in premarket trading, while Xerox's stock tumbled 4%.
Xerox's board discussed the option Tuesday, according to WSJ. There's no guarantee Xerox will formally make an offer, as HP is more than three times Xerox's size and brought on a new chief executive one week ago. A cash-and-stock buyout offer is expected to ring in at a premium to HP's $27 billion market value.
Despite the size discrepancy, an official takeover bid isn't entirely out of Xerox's grasp. The company anticipates a $2.3 billion payment from selling ownership in joint businesses to Fujifilm Holdings. It also received a major bank's informal commitment to help fund such a deal, according to WSJ.
Such a purchase would combine two former superpowers in the tech scene. Though both brands still pull in tens of billions of dollars in annual revenue, they've struggled to keep up in lucrative sectors like cloud computing and personal devices.
Both firms are in the process of boosting margins through cost cuts. HP announced a restructuring plan in early October that involves slashing 9,000 workers and focusing more on printer sales as competitors offer lower prices for ink refills.
Xerox kicked off its own cost-cutting initiative in 2019, with CEO John Visentin saying in an October 29 earnings call that the higher cash flow will support future acquisitions.
"Our strong cash flow means we're well positioned to accelerate our growth through M&A and can pursue opportunities big and small," the chief executive said.
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