Picture: REUTERS
Picture: REUTERS

New York — Xerox Holdings said it intends to nominate 11 directors to replace the board of HP after the PC maker refused to engage in takeover talks, according to a statement on Thursday.

The iconic printer maker hasn’t increased its $22-a-share takeover offer after HP rejected its proposal, which it argues undervalues the company. Instead, Xerox will seek to replace HP’s entire board through a proxy fight to push the merger through.

The nominees include former senior executives from dozens of companies, including Aetna, United Airlines Holdings and Novartis.

“HP shareholders have told us they believe our acquisition proposal will bring tremendous value, which is why we lined up $24bn in binding financing commitments and a slate of highly qualified director candidates,” said John Visentin, vice-chair and CEO of Xerox.

Xerox filed its slate ahead of a Friday deadline for board nominations. The move could potentially be a precursor to Xerox taking its offer directly to shareholders through a tender offer at the current offer price or a premium if HP continues to rebuff its efforts, according to people familiar with the matter. No decision has been made on whether to pursue a tender offer, the price it would be put forth at, or when it would do so, the people said, asking not to be identified because the matter is private.

The push to replace the board marks an escalation of the simmering tensions between the two hardware giants that have withered in a world increasingly driven by software. Xerox has argued the tie-up would revive both companies and unlock about $2bn in synergies.

Self-serving tactic

“These nominations are a self-serving tactic by Xerox to advance its proposal, which significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders,” HP said in an e-mailed statement.

HP’s board currently has 12 members. Dion Weisler, the former CEO, has said he will step down at the next AGM, which the company said will reduce the board size to 11. Its last AGM was on April 23.

In November, HP rebuffed an unsolicited, cash-and-stock offer from Xerox, citing concerns about the financial health of its smaller rival, which has experienced declining annual revenue since 2012.

HP’s board said it is open to exploring a merger, but believes the offer undervalues the company. Activist shareholder Carl Icahn, who owns about 11% of Xerox and has a 4.3% stake in HP, has pushed for the tie-up.

Xerox announced on Januart 6 that it had arranged a $24bn loan with a group of banks to finance the takeover. HP and its advisers had questioned Xerox’s ability to raise the money for the deal. Following the financing announcement, HP said it believes the offer still undervalues the company.

Citigroup is acting as Xerox’s financial advisor, and King & Spalding is providing legal counsel to Xerox. Willkie Farr & Gallagher is providing legal counsel to Xerox’s independent directors.