Xerox Mulls Acquisition of HP Potentially Merging Two Tech Icons

Xerox, the copy machine icon, is eyeing an acquisition of printer maker HP, potentially combining two companies that were once forces in the technology sector.

People familiar with the matter told the Wall Street Journal Xerox is mulling making a cash and stock offer for HP which the paper said has a valuation of roughly $27 billion.

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Xerox will have to pay up 

If a deal were to happen, Xerox will likely have to offer a premium to where HP's stock is trading. That got a little more expensive with shares of HP recently trading tk% higher on deal talk. The Wall Street Journal cautioned a deal may not materialize given HP is three times bigger than Xerox. 

Xerox will have more fresh firepower now that it's on tap to receive $2.3 billion from selling a stake in Fujifilm Holdings. Xerox announced the deal Tuesday, saying it will sell a 25% stake in Fuji Xerox to a subsidiary of Fujifilm. It's also selling its 51% stake in Xerox International Partners and announced the dismissal of a $1 billion lawsuit Fujifilm filed against Xerox after their merger fell apart last year. Xerox said the $2.3 billion would be used to pursue M&A in "core and adjacent industries."  The sources told the Wall Street Journal that in addition to the $2.3 billion Xerox just got an informal funding commitment from a big bank.

An end of an era or start of something new? 

If Xerox acquired HP, which just appointed a new CEO, it would be quite the journey for the two icons. Xerox is synonymous with copy machines and HP is an icon in the printing market. Both have household name recognition and businesses that have been struggling in recent years.

With the world becoming increasingly digital there isn't as much need for both companies' core products. By combining, the two can slash costs and go after new opportunities they can't afford to do on their own.

The bulk of Xerox's revenue comes from servicing its huge printers and copy machines found in corporations around the world. HP, a result of a split from the business arm of the company, sells consumer printers and is still a favored brand among them. HP makes money from the ink and supplies, but with that business taking a beating, it has weighed on its financials.