As confirmed in a recent press release, Xerox (NYSE: XRX) has floated an offer to buy HP (NYSE: HPQ), an aging tech giant, and a former powerhouse in the field of personal computing. There is much speculation as to whether the deal will go through, and what benefits a potential merger of two aging tech companies will bring both to the market and themselves.
Little details are known about the potential deal as of the writing of this article, but in the days since the it was first announced that Xerox had considered the buyout, there has been a great deal of speculation and commentary by industry experts.
Skepticism has been leveraged against the easily observable fact that HP dwarfs Xerox in sheer size and net worth; HP is worth $27 billion while Xerox clocks in at only $8 billion. Xerox has received an influx of cash recently after selling off its stakes in Fujifilm to the tune of $2.3 billion, but the company would still need an additional $25 billion in funding to make any such deal possible. These simple facts make the transaction as proposed unlikely, but a merger isn't entirely ruled out. One potential possibility some have floated is a reversal of the current propose where HP seeks to acquire Xerox instead.
Additional criticism has been lobbed at whether the deal could bring any benefits. Some are convinced that the possible agreement would pose no benefits to either company or even be outright detrimental. Both companies are benefiting from a recent rebound in stock price, but the sober reality is that Xerox and HP aren't feeling the best either, with both being forced to enact cost-cutting measures to trim down overhead.
Some were at least somewhat optimistic about a potential merger, feeling that at the very least, HP investors could see a possible merger as an opportunity to offload their shares and make a clean getaway of a company struggling to keep its relevance. Additionally, the two companies cover different ends of the printer market, and a merger could put them on equal footing against their competitors, such as Canon or Ricoh. The duo could also see this as an opportunity to cut costs, a merger would allow redundant, unsuccessful, or otherwise burdensome divisions to be cut as more successful divisions from the newly acquired company are integrated.
As for HP itself, the company's Board of Directors doesn't seem to feel any urgency when it comes to the deal. In general, the Board appears somewhat uncertain as of late. Citing knowledgeable sources (who requested that they remain unnamed), Nico Grant of Bloomberg reported that "HP's board is trying to create the most value for shareholders and isn't yet convinced a sale to Xerox is the right move."