Printer and copier maker Xerox (XRX) is considering making an offer to buy personal computer and printer maker HP (HPQ) in a deal that would combine two storied names in the technology field. HP stock surged on the news Wednesday.
XThe Wall Street Journal reported late Tuesday that Xerox is looking to make a cash-and-stock offer for HP, which has a market value of about $29 billion. The deal would be like a minnow swallowing a whale since Xerox has a market capitalization of about $8 billion.
Norwalk, Conn.-based Xerox has received an informal funding commitment from a major bank to back the deal, the Journal said.
HP stock soared 12.3%, near 20.70, in morning trading on the stock market today. Xerox stock rose 1.6%, near 37.
Xerox Stock Breaks Out On Asset Sale
On Tuesday, Xerox stock broke out of a first-stage cup base at a buy point of 36.68, according to IBD MarketSmith charts. Investors reacted positively to news that Xerox will receive $2.3 billion from the sale of stakes in joint ventures with Fujifilm Holdings of Japan. Xerox also announced the dismissal of a $1 billion lawsuit that Fujifilm filed against Xerox after last year's terminated merger.
In a news release, Xerox said it expects to use the proceeds of asset sales to pursue mergers and acquisitions in core and adjacent industries. It also plans to use the proceeds to pay down debt and return capital to shareholders.
HP and Xerox are retooling their businesses as demand for printed documents declines. A merger of the two companies could lower expenses by more than $2 billion, sources told the Journal.
In early October, HP Chief Executive Enrique Lores announced a restructuring plan that would yield annual cost savings of $1 billion. HP also plans to cut as many as 9,000 employees, or 16% of its workforce.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor companies.
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