Watching the fight between Xerox and HP can feel a lot like watching a pair of bickering old-timers. The veteran tech companies have been trading barbs since November, when Xerox first went public with a $33bn takeover bid for its much larger rival printer maker. On Thursday Xerox launched a fresh attack. Two months after its hostile offer it now wants to overthrow HP's board.
A proxy fight is a tactic more often used by activist investors to pressure companies to come to the table. It is unusual to see it deployed by one company against another. Especially when the target's market value is four times bigger than the would-be acquirer's.
Xerox's main advantage is Carl Icahn. The billionaire activist investor owns 11 per cent of Xerox and has a long history of winning proxy fights. He managed to dissolve Xerox's planned merger with Fujifilm in 2018 and install John Visentin as chief executive. Mr Icahn owns just 4 per cent of HP and supports the idea of a tie-up.
HP has size and time on its side. The computer and printer maker rakes in six times more revenue and generates three times more free cash flow than Xerox. It also has no net debt. Even the $2bn in synergy touted by Xerox sounds less impressive when you consider that HP is already targeting $1bn of cost savings.
Printer making is a fading industry in the digital age. It makes sense for Xerox and HP to join forces. The fact that the two held talks last year suggests as much. Price and control seem to be the main sticking points. HP has hinted that it would be open to a sweetened offer. Xerox is adamant HP must come to the negotiating table first.
Xerox should stop being so stubborn. A drawn-out proxy battle will give HP the time necessary to show its restructuring plan is working. At the very least, it would give management time to use the company's strong balance sheet to ramp up returns and keep the peace.
Lex is a premium daily commentary service from the Financial Times