M&A February 25, 2020 1:48:19 pm

HP plans to buy back $15B in stock as part of plan to stop Xerox’s hostile takeover

By Lucas High

NORWALK, Connecticut and PALO ALTO, California — HP Inc. (NYSE:HPQ) said it plans to buy back $15 billion in stock over the next two years as it attempts to consolidate ownership in the face of a hostile takeover from Xerox Holdings Corp. (NYSE: XRX).

In a plan released alongside its earnings Monday afternoon, the Palo Alto computing giant said it would specifically try to repurchase $8 billion in the 12 months after its 2020 shareholder meeting this spring, representing 25 percent of the company’s ownership.

The company’s market capitalization at the close of trading was $32.12 billion, meaning HP would be buying back just under 50 percent of its shares outstanding over the next two years.

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HP is in the middle of a months-long fight against Xerox, which is trying to load HP’s board with new directors and preparing a tender offer to HP shareholders in an effort to acquire the company for $34.8 billion. HP set up a “poison-pill” stock sale plan last week, which could significantly increase the price Xerox has to pay to buy a majority stake.

“Our commitment to HP shareholders is unwavering, and it’s abundantly clear the revised Xerox proposal meaningfully undervalues HP, creates significant risk and compromises the future of our company,” HP CEO Enrique Lores said in a statement.

HP said it will also reach between $4.7 billion and $5.1 billion in operating profit and between $10.7 billion to $11.7 billion in free cash flow between fiscal years 2020 to 2022. It intends to do that by finding $2.2 billion in combined cuts and productivity improvement efforts.

HP’s revenue was $14.62 billion in the previous quarter, which missed Wall Street consensus estimates by $20 million, according to data from Seeking Alpha. Its earnings per share of 65 cents per share beat estimates by 11 cents.

HP has long been a major tech employer for the region, once employing thousands in Loveland and Greeley before downsizing to a single 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.