Xerox wants to acquire HP, but the price is still undervalued after reaching $35 billion

HP on Thursday rejected a raised takeover bid from Xerox Corp, saying the offer, valued at about $35 billion, still undervalued the PC maker.

Xerox's initial takeover offer was rejected by HP for the same reason, and it subsequently raised its offer by $2 to $24 per share last month.

HP Chairman Chip Bergh said the offer would leave HP shareholders with an irresponsibly high level of debt after the merger. He said in a statement: "It would also require unrealistic and unachievable synergies that would put the entire company at risk." He pointed to Xerox's declining sales and said the company's recent sale of its stake in a joint venture with Fujifilm raised concerns about the company's future.

Xerox's acquisition of HP has been described as "a snake swallowing an elephant." As of Monday's close, HP's market value was $31.8 billion, 4.5 times that of Xerox's $7.1 billion.

Analysts say that the rise of electronic office and cloud office makes the prospects of paper printing business uncertain. Xerox hopes to work with HP to consolidate its market position and jointly resist risks. In 2011, HP spent $11.1 billion to acquire British software company Autonomy, but the software transformation was not successful and was almost a failure of investment. In 2015, HP split up and network equipment and server services were assigned to HP Enterprise. In 2017, HP spent $1.05 billion to acquire Samsung's printer business.

Today, HP's main revenue comes from personal computer business such as notebooks, but its profits rely on office equipment such as printers.

Xerox decided to sell its 25% stake in Fuji Xerox for $2.3 billion last November after activist investor action derailed a merger between Xerox and Fujifilm.

After Xerox raised its offer last month, HP said it would implement a "poison pill" to prevent investors from taking more than 20% of HP's shares.

HP on Thursday asked shareholders to reject Xerox's public takeover bid launched earlier this week, saying it would provide Xerox shareholders with far greater benefits than HP shareholders.

Xerox's stock price fell more than 4% that day, while HP's stock price fell 1%.