Xerox is stockpiling a new weapon in its fight to acquire printer rival HP: board seats. According to published reports, Xerox is readying plans to nominate as many as 11 people to HP’s governing board this summer to pressure the company into a merger.
The Lowdown: According to the Wall Street Journal, Xerox bought a small stake in HP over the past few weeks. The move gives it the right to nominate directors to the HP board when shareholders meet for their annual meeting this summer. Given that two proponents of the merger — Carl Icahn and Darwin Deason — have signficant stakes in both companies — Xerox stands a reasonable chance of getting some of its people on the HP board.
The Details: Xerox hasn’t said it will nominate a slate for the HP board, and the concept could remain an option in its hostile takeover bid of the much larger HP. The current HP board consists of 12 members, including chairman Chip Bergh, CEO and managing director Enrique Lores, and former CEO Dion Weisler.
The Impact: Stacking the HP board with friendly directors is an old tactic from the hostile takeover playbook. The Wall Street Journal describes the referendum, in which a favorable outcome for Xerox could spark a movement among shareholders to back the merger.
Background: Since November, Xerox has made two formal offers to acquire HP, which is four times its size in market value and nearly six times its size in terms of gross revenue. Xerox offered packages ranging between $30 billion and $32 billion in cash and stock deals. HP has called the offers too low and questioned Xerox’s ability to fund an acquisition. Earlier this month, Xerox secured $24 billion in financing from three major banks.
Related Links:
WALL STREET JOURNAL: Xerox to Nominate as Many as 11 Directors to HP Board
CHANNELNOMICS:
> HP Again Rejects Xerox’s $33 Billion Takeover Bid
> Report: Xerox Secures Major Funding to Buy HP
> HP to Xerox: You Don’t Have the Ink to Buy Us
> Xerox Getting Hostile in HP Acquisition Bid
