March 10, 2020

More on Xerox’s Not Particularly Hostile Bid for HP

Last week, I blogged about Xerox’s tender offer for HP & why from a legal perspective, it wasn’t a particularly hostile bid.  I subsequently received an email from a member with an insight into another “pressure point” on HP’s board that resulted from Xerox’s decision to move forward:

I agree that filing the exchange offer gives the hostile bidder some advantage by (i) forcing the target board to respond to the offer perhaps sooner than it otherwise would; and (ii) putting the target in a position of having to update its disclosures based on material developments (e.g., entrance of a white knight).

There’s also another reason to file – namely, some investors want to see a TO document on file to give them more assurance that there’s a specific deal that can be immediately consummated if the incumbents are ousted in a proxy contest. Even if the TO is conditional, some investors will take greater comfort about the hostile bidder’s commitment to price and timing.

As the corporate law environment has evolved, a “hostile” tender offer like Xerox’s may not put much additional pressure on a target board when it comes to what the directors’ fiduciary duties require. However, the legal obligations imposed on that board by the federal securities laws do turn up the heat somewhat, and investor perceptions of the seriousness of a bidder that is willing to cross the tender offer Rubicon may really make the target’s board feel the squeeze.

John Jenkins