Latest Plot Twist: Pension Fund Sues Xerox Majority Shareholder Carl Icahn for Buying HP Stock
With the M&A battle still waging between Xerox Holdings and HP Inc., majority Xerox shareholder and activist investor Carl Icahn, and an investment vehicle he controls, are being sued by a pension fund that is also a shareholder in Xerox.
According to Bloomberg, the Miami Firefighters and Pension Fund filed a lawsuit in Manhattan on Dec. 13, claiming that Xerox board member Icahn, Icahn Capital, and High River Limited Partnership, breached their fiduciary duties when they acquired $1.2 billion worth of HP stock. The suit alleges that Icahn knew Xerox was contemplating an unsolicited $33.5 billion stock-and-cash offer to acquire HP — a proposal that ultimately valued HP stock at a premium of $22 per share.
The lawsuit contends Icahn did so "with the knowledge that Xerox was considering making an offer to purchase HP, had already approached HP about a possible merger into or acquisition by Xerox, or of the obvious merits of Xerox's potential acquisition of HP."
Icahn is Xerox's largest shareholder with an 10.85% ownership stake in Xerox and, as of Sept. 30, had become HP's fifth largest shareholder with a 4.24% ownership position. Icahn reported in August that he had no position in HP as of June 30, Reuters reported, but then disclosed in late November that he owned approximately 70 million shares of HP stock. Although the exact time frame of the HP stock purchases have not been disclosed, Reuters quoted an unnamed analyst who reported a "huge spike" in trading volume for HP stock.
As reported earlier in Printing Impressions, Icahn is urging HP's board to expedite mutual due diligence to work out a merger with Xerox, which he claims will create more than $2 billion in cost efficiencies due to synergy reductions. He also referred to HP's earlier announced cost-cutting plan to cut up to 16.9% of its workforce as amounting to little more than rearranging the deck chairs on the Titanic.
"Over the years, I have seen many obvious 'no-brainers' that would greatly enhance value and have worked hard to facilitate these, but I can say without exaggeration that the combination of HP and Xerox is one of the most obvious no-brainers I have ever encountered in my career," Icahn penned in a letter directed at HP shareholders, which also encouraged them to pressure HP's board for a deal.
This allegation of "insider trading" and the subsequent lawsuit are just the latest developments in the Xerox/HP saga — a hostile corporate takeover attempt that likely will some day serve as boardroom case history fodder for lengthy analysis in the Harvard Business Review.