In one of the most controversial (and exhausting) ongoing industry “melodramas,” Xerox has finally announced that it would be dropping its hostile takeover bid of HP. Xerox, valued at $8 billion when its plans were first revealed, had offered to somehow finance a $34 billion cash-and-stock acquisition of HP, which was valued at $31 billion at the time. The war between the two industry giants started in the Fall of 2019, has continued to this day – and also included an attempt to take over the HP board with Xerox’s own nominations that, not surprisingly, was soundly rejected by HP.
Speculation was that, with a global recession on the horizon due to the worldwide COVID-19 Pandemic, HP in fact looked to be in a much better position to weather the pandemic’s expected economic consequences than its much smaller competitor. In a statement released last week, Xerox said that COVID-19 had “created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP.” Industry experts also pointed out that one of the trends that initially sparked talks of a merger (i.e. the falling demand for print) will persist with or without the current Coronavirus Pandemic.
The decision also means that HP and Canon can continue their current, mutually beneficial and successful relationship. Canon CEO and Chairman Fujio Matarai made it crystal clear two weeks ago that a takeover of HP by Xerox would create a company that would rival Canon’s own business. Therefore, he said that Canon will “cut its ties with HP if the hostile takeover bid launched by Xerox is successful.” HP currently buys laser-printer components from Canon, and is one of the Japanese OEM’s largest customers, generating almost 14% of its sales annually. “The relationship, which involves the sharing of technology and intellectual properties, is based on trust between the companies’ top management,” Matarai insisted. “Such a relationship is not something that can be built overnight. Canon intends to partner with and strive to advance the collective interests of organizations that have a strong track record of operating with integrity, while clearly share our values.”