US printer maker Xerox has made a roughly $33bn (£25.7bn) cash-and-stock offer for personal computer maker HP, a move on a company more than three times its size, people familiar with the matter said on Wednesday.
Five days ago Enrique Lores, previously the president of HP’s imaging and printing business, officially took over as its CEO. Xerox’s stock has rallied under CEO John Visentin, who took over last year and resolved a long-running dispute with the company’s joint venture partner Fujifilm.
Xerox said on Tuesday it would sell its 25 per cent stake in its joint venture with Fujifilm for $2.3bn. Fujifilm agreed to drop a lawsuit against Xerox. With the dispute behind it and more cash in hand, Xerox set its sights on HP.
Xerox has offered to acquire HP for between $22 and $23 per share, to be paid in cash and Xerox stock, the sources said. To help fund the cash portion of the deal, Xerox has lined up financing from Citigroup, the sources said.
Xerox believes it can achieve at least $2bn in annual cost synergies by creating an office technology supplies giant, one of the sources said. HP will spend a few days considering the offer before responding, another of the sources added.
The sources asked not to be identified because the matter is confidential. HP declined to comment, while Xerox and Citigroup did not respond to a request for comment. The Wall Street Journal first reported that Xerox was preparing a bid for HP.
HP shares were up eight per cent to $19.85 in afternoon trading in New York on Wednesday. Xerox shares were up four per cent at $37.80, giving the company a market capitalization of $8.4bn.
Xerox had scrapped its $6.1bn deal to merge with Fujifilm last year after pressure from two of its main investors, Carl Icahn and Darwin Deason, who went on to overthrow its board.
HP has been struggling with its printer business segment recently, with the division’s third-quarter revenue dropping 5 per cent year-on-year.
In October, it had announced a plan to cut up to 9,000 jobs as part of a restructuring program aimed at cutting costs.
This is not the first deal that Icahn has tried to orchestrate by having a small company buying a bigger one. In June, US casino operator Eldorado Resorts agreed to acquire larger peer Caesars Entertainment for $17.3bn, including debt.
Icahn had earlier got seats on the board of Caesars.