HP sets up poison pill against Xerox’s hostile takeover

NORWALK, Connecticut and PALO ALTO, California  — HP Inc. (NYSE: HPQ) set up a “poison-pill” plan against Xerox Holdings Corp. (NYSE: XRX) as part of the ongoing hostile takeover drama that could affect one of the largest tech employers in Northern Colorado.

Under the “shareholder rights plan” released Thursday afternoon, HP is giving its current shareholders the right to purchase new stock from the company at a significant discount in the event that a person or group acquires 20 percent of the company’s shares.

The plan expires after a year and specifically refuses to grant the right to buy new shares to any party that takes more than 20 percent control of the company.

“The rights will not prevent a combination of HP with another business, but should encourage Xerox (or anyone else seeking to acquire the Company) to negotiate with the Board prior to attempting to impose some combination that is not in the best interests of the HP shareholders,” HP said in a statement.

Shareholder-rights plans, also known as “poison pills”, are designed to ward off hostile takeovers by making a company significantly more expensive to take over. In this case, HP’s plan would allow stockholders opposed to a Xerox takeover to increase their positions and make it more difficult and expensive for Xerox to acquire 51 percent of HP’s shares.

However, issuing new shares in a company dilutes the ownership value and tends to make the stock less valuable on the market.

Preferred stock in a public company gives the holder higher priority in being paid dividends and making a claim for the company’s assets if it declares bankruptcy, but it doesn’t have the voting power of common stock.

In a statement, Xerox said HP’s plan won’t deter it from trying to buy a controlling stake from shareholders and trying to stock HP’s board with its own slate of candidates.

“Despite the HP board’s intention to deny shareholders the chance to choose for themselves, we will press ahead with our previously announced tender offer and electing our slate of highly qualified director candidates,” the company said.

HP established the plan ahead of its earnings report next Wednesday, where it is expected to pitch to its investors why a Xerox takeover wouldn’t be in their best interest.

HP has long been a major tech employer for the region, once employing thousands in Loveland and Greeley before slowly shrinking its footprint to just one office in Fort Collins. About 600 people work at the Fort Collins office, according to estimates from LinkedIn data.

HP Enterprise Inc. (NYSE: HPE) also has offices in Fort Collins and Boulder, but is a separate company from HP Inc. and wouldn’t be affected if Xerox succeeds in its takeover efforts.

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