While Xerox courts HP shareholders, HP adopts poison pill

HP Inc. announced it would implement a poison pill plan to thwart the attempt by rival Xerox Holdings to acquire the maker of printers. Xerox recently raised its offer earlier this month by $2 to $24 per share, following a series of rejections of other buyout offers. Meanwhile, Reuters reported Xerox execs hosted a dinner in Greenwich Village for HP shareholders in a bid to gain shareholder support for its plan.

The “stockholder rights plan” – commonly called a “poison pill’ – would prevent investors from amassing greater than a 20% stake in the company. The plan has a one-year expiration. According to the plan, if a group acquires 20%, all shareholders outside that group will be able to buy additional discounted shares, diluting the ownership.

“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 its statement.

The Board of Directors of HP Inc. (NYSE: HPQ) today adopted a shareholder rights plan and declared a dividend distribution of one preferred share purchase right on each outstanding share of HP common stock.

The Board adopted the rights plan following the announcement by Xerox Holdings Corporation that Xerox intends to commence a tender offer to acquire all of the outstanding shares of HP common stock.

HP has previously said that on February 24, when out of its quiet period, HP will share additional information about its plan to drive sustainable long-term value for its shareholders, including through the execution of the Company’s multi-year strategic and financial plan and the deployment of its strong balance sheet; and that HP wants its shareholders to have full information on the Company’s earnings and the value inherent in the Company before responding to Xerox’s February 10 press release.

“HP’s board is focused on creating long-term value for HP shareholders. We believe it is essential that HP shareholders have sufficient time and full information when considering any tender offer that Xerox may commence,” said Chip Bergh, Chair of HP’s Board of Directors. “As we have previously said, we are very concerned about Xerox’s aggressive and rushed tactics, and any process that is not based on full information is a threat to our shareholders.”

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.

The rights plan has several recognized shareholder protections, including:

• Guards against coercive tactics to gain control without paying all shareholders an appropriate premium for that control.
• Expiration date in one year (and the Board of Directors of HP intends to consider whether to terminate the rights plan earlier than such date if circumstances warrant).
• Facilitates the ability of all shareholders to realize the long-term value of their investment in the Company.

The rights will be exercisable only if a person or group acquires 20% or more of HP’s common stock, subject to certain exceptions. Each right will entitle shareholders to buy one one-hundredth of a share of a new series of junior participating preferred stock at an exercise price of $100.

If a person or group acquires 20% or more of HP’s outstanding common stock, each right will entitle its holder (other than such person or members of such group) to purchase for $100, a number of HP common shares having a market value of twice such price. In addition, at any time after a person or group acquires 20% or more of HP’s outstanding common stock (unless such person or group acquires 50% or more), the Board may exchange one share of the company’s common stock for each outstanding right (other than rights owned by such person or group, which would have become void).

Prior to the acquisition by a person or group of beneficial ownership of 20% or more of the Company’s common stock, the rights are redeemable for $0.01 per right at the option of the Board.

Certain synthetic interests in securities created by derivative positions — whether or not such interests are considered to constitute beneficial ownership of the underlying common stock for reporting purposes under Regulation 13D of the Securities Exchange Act — are treated as beneficial ownership of the number of shares of the Company’s common stock equivalent to the economic exposure created by the derivative position, to the extent actual shares of the Company’s stock are directly or indirectly held by counterparties to the derivatives contracts.

The dividend distribution will be made on March 2, 2020, payable to shareholders of record on March 2, 2020, and is not taxable to shareholders. The Rights will expire on February 20, 2021.