Activist investor takes 4.24% stake in HP to go with 10.6% stake in Xerox
Activist investor Carl Icahn has emerged as a figure in the proposed $33 billion takeover of HP by Xerox, arguing that a merger of the print technology giants would be a boon for shareholders of both companies.
The Lowdown: Icahn confirmed his involvement in the cash-and-stock bid in an interview this week with The Wall Street Journal.
The Details: Icahn has a stake in both sides of the proposed merger. He already held 10.6% of Xerox stock and told the newspaper that between April and August, he acquired a 4.24% stake in HP, valued at about $1.2 billion. However, Icahn said that, as he accumulated the HP stock, he wasn’t thinking about a merger with Xerox.
He said he doesn’t care how the merger occurs. Xerox currently has a market value of about $8.5 billion, less than a third of the $29.6 billion value of HP, though some industry observers said it would make more sense for the larger HP to buy Xerox. The deal reportedly would help both companies by reducing costs by $2 billion and giving the combined company a more balanced product portfolio.
An HP spokesperson told Reuters that the company is aware of Icahn’s investment. That said, the company remains committed to doing what is best for HP’s stakeholders, the spokesperson said. It could take several weeks before a decision on the deal is made.
The Impact: Icahn’s reveal in the WSJ throws a big name into a story that already has gotten a lot of attention. Icahn has a reputation for grabbing a commanding share of companies and forcing strategies aimed at benefitting shareholders. In recent years, he and other activist investors, such as Elliott Management, have turned their attention to the tech industry. Icahn has been active in such previous high-profile deals as Dell-EMC, and more recently played a role in stopping Xerox’s planned merger with Fujifilm.
Earlier this month, Xerox sold its stake in Fuji Xerox to Fujifilm for $2.3 billion.
Background: Xerox’s proposed takeover of HP comes during a time of change in the printer and copier market as businesses and consumers increasingly reduce the amount of printing they do in favor of digital technologies. The printer business had been a major revenue source in a unified Hewlett-Packard, before the company split in two four years ago to create HP Inc. and Hewlett Packard Enterprise. Recently, HP saw third-quarter sales in its printing business unit drop about 5% year-over-year and officials warned that revenue will continue to drop into 2020.
The Buzz: “I think a combination is a no-brainer,” Icahn told the WSJ. “I believe very strongly in the synergies. There will probably be a choice between cash and stock, and I would much rather have the stock, assuming there’s a good management team.”