Xerox Drops Hostile Bid for XP, Shares Drop 7%

Xerox (NYSE:XRX) said it decided to drop a $34 billion hostile bid for HP (NYSE:HPQ) amid the coronavirus uncertainty. It is likely that the saga around the takeover bid is now over, after numerous angry letters being exchanged.

“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.,” the company said in a statement.

“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”.

Analysts were always questioning the logic behind the Xerox bid for HP, as the latter is more than six times bigger in terms of market cap. For this reason, the board of HP was adamant from the beginning that this takeover will not be completed as Xerox has no financial capacity to complete a deal like this.

“We remain firmly committed to driving value for HP shareholders. HP is a strong company with market leading positions across Personal Systems, Print, and 3D Printing & Digital Manufacturing,” said HP in a statement.

“We have a healthy cash position and balance sheet that enable us to navigate unanticipated challenges such as the global pandemic now before us, while preserving strategic optionality for the future”.

In February, the HP board offered around “$16 billion worth of “capital return” between its fiscal 2020 and fiscal 2022,” to its shareholders to convince them not to complete the Xerox deal.

Technical analysis: Stock price fails to rebound

Xerox stock price opened around 6% lower yesterday following the statement on the HP takeover bid. Shares of the company attempted to push higher, but that attempt failed over the course of the day and the stock price closed more than 7% in red.

The failure to rebound following the lower open was facilitated by a strong horizontal resistance, the former support, around the $18.50 mark. Hence, we can expect Xerox stock price to continue lower now and possibly set a fresh multi-year low below $15.01. Looking lower, the $12.70 is a major support for the bulls.

Summary

Xerox stock price has taken another hit after the company announced it is dropping its $34 billion hostile bid to take over a much bigger competitor HP amid the COVID-19 uncertainty. Shares of the company closed 7% lower yesterday as the sellers reaffirm the control.