The ongoing coronavirus pandemic is making many companies give up on their previously planned acquisitions. As such, M&A activity is expected to be relatively light, if not virtually non-existent, while the virus continues to spread across the country. What would have been one of the largest mergers this year between Xerox (NYSE:XRX) and its larger cousin HP (NYSE:HPQ), has officially been canceled amidst the coronavirus pandemic as well as the fears of a further bear market.
Xerox announced on Tuesday that the company would no longer be pursuing its aggressive merger with HP due to the coronavirus, especially since going into further debt during this time might not be the best idea. For the past five months, Xerox has been trying to make some sort of merger or acquisition work between the two companies. HP had repeatedly rejected various offers, including one that priced the company at $24 per share.
“The current global health crisis and resulting macroeconomic and market turmoil caused by COVID-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP Inc. (NYSE: HPQ) (“HP”). Accordingly, we are withdrawing our tender offer to acquire HP and will no longer seek to nominate our slate of highly qualified candidates to HP’s Board of Directors,” read an official statement from the company.
It’s rare to see a company try so diligently to buyout another rival three times its size. In these kinds of situations, the smaller company would end up taking an exorbitant amount of debt to try and make it work. Although HP was trading at a new 52-week low earlier this month, something which could have made it easier for Xerox to make an offer, HP would still likely have rejected the offer nonetheless.
Shares of Xerox were up 5.5% over the course of the day, although they ended up dipping down 2.3% in after-hours trading. Like most companies, shares have tumbled significantly since the coronavirus pandemic began to escalate in the U.S., with prices falling by around 60% since February. Although most analysts covering the stock remain neutral about the company’s prospects, withdrawing from this acquisition might be the better decision for Xerox right now. This is especially true since saving money during this coronavirus pandemic seems like something companies need to be doing right now.
Right now, the total number of coronavirus cases around the world has reached 850,000, with 180,000 of them coming from the U.S.
Xerox Company Profile
Xerox is an original equipment manufacturing and software company. Xerox operates in one segment–design, development and sale of printing technology and related solutions–while deriving 60% of its revenue from North America, and 40% from international markets. The company is an OEM of multifunction printers, or MFPs (printers that can print, copy and scan), focusing on large enterprise markets. Apart from equipment, the company provides post sales services like managed print services–a service that helps to bring smart servicing and efficiencies to how employers use their print/copy equipment. Xerox is attempting to enter new markets like digital print packaging solutions and printed electronics. – Warrior Trading News
