Xerox Selling $500 Million Loan to Support Icahn Share Buyback
Xerox Corporation, a global leader in document management and printing solutions, announced on October 30th that it is selling a $500 million loan to support a share buyback program proposed by activist investor Carl Icahn. The loan will be used to finance the purchase of up to $1 billion of Xerox’s common stock.
Background of Icahn’s Proposal
Icahn, who owns a 9.9% stake in Xerox, has been pushing for a share buyback program since early 2020. He believes that the company’s stock is undervalued and that a buyback would help to increase its value. In August 2020, Icahn proposed a $2.5 billion buyback program, which was rejected by Xerox’s board of directors.
Xerox’s Response to Icahn’s Proposal
In response to Icahn’s proposal, Xerox’s board of directors proposed a $1 billion buyback program in October 2020. The board also announced that it would be selling a $500 million loan to finance the buyback. The loan will be sold to a group of investors, including Icahn, and will be used to purchase up to $1 billion of Xerox’s common stock.
Benefits of the Buyback Program
The buyback program is expected to benefit Xerox shareholders by increasing the value of their shares. The company believes that the buyback will help to reduce its outstanding shares, which will in turn increase the value of each share. Additionally, the buyback program is expected to improve the company’s financial position by reducing its debt.
Risks of the Buyback Program
The buyback program is not without risks. If the company’s stock price does not increase as expected, the buyback could result in a loss for the company. Additionally, the buyback could lead to a decrease in the company’s cash reserves, which could make it more difficult for the company to finance future projects.
Conclusion
Xerox’s decision to sell a $500 million loan to finance a share buyback program proposed by activist investor Carl Icahn is a risky move. The buyback program could lead to a decrease in the company’s cash reserves and could result in a loss if the stock price does not increase as expected. However, the buyback program is expected to benefit Xerox shareholders by increasing the value of their shares.