Fortune - 04.2020

(Wang) #1
38 FORTUNE APRIL 2020

OHN VISENTIN is speaking with the
simmering impatience of someone
who’s 100% sure his opponents are
100% wrong. “They want to block
us with a poison pill, telling their
investors they aren’t bright enough to
make up their own minds,” he fumes.
“That really annoys me!”
The “they” here is HP Inc. And
Visentin, CEO of venerable printer-
maker Xerox Holdings, is building
a case for one of the most audacious
takeover quests in recent memory.
In November, Xerox made a guppy-devours-
the-whale bid to buy HP, an offer now set at
$35 billion. Today, with a cliffhanger proxy
battle looming, HP’s countermoves are irking
the takeover architect.
Visentin, a plainspoken 57-year-old from
a blue-collar Canadian family, is the antith-
esis of a swashbuckler. He’s a career tech guy
whose résumé includes a few stellar years in
private equity and a stint as an executive vice
president at the old Hewlett-Packard. But he’s
capable of waxing passionate about his plans.
“Printing is long overdue for consolidation,” he
says, during an interview at Xerox’s anony-
mous glass-cube headquarters in Connecticut.
“The potential for cutting costs, for investing
for the future, is tremendous.” HP, he says, is
thwarting Xerox by promising huge share buy-
backs: “How is that investing for the future?”
Thirty years ago, a Xerox-HP takeover
battle might have dominated the headlines.
Today, these aging giants operate far from the

J

spotlight. But they still run richly
profitable printing businesses, gen-
erating cash that could finance the
kinds of transformation that Visen-
tin envisions. What makes his bid
particularly bold is that it has been
decades since a company Xerox’s
size has succeeded in buying a rival
that’s so much bigger. In 2019, Xerox
posted sales of $9.1 billion—less than
one-sixth of the $58.8 billion HP tal-
lied in its most recent fiscal year.
One person’s “bold,” of course, is
another person’s crazy. To finance
the merger, Xerox would take on
$24 billion in new debt. “It makes
no sense because all that debt would
make the combined company much
riskier,” says Bill George, former CEO
of Medtronic and a professor at Har-
vard Business School. HP brass, who
oppose the merger, argue that the le-
verage would threaten the companies’
survival. “You can’t work through
economic cycles with that level of
debt,” says CFO Steve Fieler, who
calls Visentin’s $2 billion in planned
annual savings “unachievable.”
Xerox’s offer—now $24 a share,
a premium of about 20% over HP’s
mid-March stock price—will face
a vote at HP’s annual shareholder
meeting, expected in May. Rooting
for a deal is activist titan Carl Icahn.
He’s Xerox’s largest investor, with an

PAPER CUTTER
Xerox’s Visentin
argues that
steep expense
reductions and
bets on big
digital printers
like the Iridesse
(shown here)
would make an
HP-Xerox merger
pay off.

TECHNOLOGY

Two 20th-century tech giants are duking it out in a hostile-takeover battle,
with the future of a $200 billion industry at stake —and
rabble-rousing investor Carl Icahn watching from the wings.

BY S HAWN TUL LY

INSIDE XEROX’S

AUDACIOUS BID TO BUY HP

PHOTOGRAPH BY
REED YOUNG

XER.W.0420.XMIT.indd 38 FINAL 3/9/2020 6:12:14 PM

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