Carl Icahn, the activist investor with a sizeable stake in Xerox, has amassed a smaller holding in HP Inc. and is backing a proposed merger between the companies that once dominated their respective industries, according to the Wall Street Journal.
Icahn told the Journal he holds 4.2 percent of outstanding shares in HP, the maker of personal computers once known as Hewlett-Packard and previously run by former GOP presidential candidate Carly Fiorina. The holding isn't yet reflected in regulatory filings for Icahn's firm that have to be updated at the end of every quarter.
HP confirmed last week that it has received an offer from Xerox, a company whose name was synonymous with photocopiers that now sells printers as well as digital document services for businesses, without specifying the amount. Reuters valued the bid at $33 billion, citing sources it didn't identify.
“A combination is a no-brainer,” Icahn told the Journal. “There will probably be a choice between cash and stock, and I would much rather have the stock, assuming there’s a good management team.”
A merger would benefit investors in both companies by reducing costs as much as $2 billion and giving the combined firm a more balanced portfolio, the Journal reported. Icahn said he doesn't have a preference on how the deal is structured; some analysts have suggested a takeover of Xerox by HP would make more sense, given their respective sizes.
Xerox has a market value of $8.5 billion, while HP's is more than three times as much, at $29.6 billion. HP didn't immediately respond to FOX Business' request for comment.
"Consolidation in the print industry makes sense, given the overall pressures in the market" and the growing number of companies providing printers that handle traditional letter- and legal-sized documents as well as those that can handle larger jobs, said Munjal Shah, an analyst with the Swiss lender UBS. Xerox has a strong position in the market for larger equipment, while HP devices specialize in smaller jobs, Shah wrote in a note to clients.
If the two companies combined, they would control 31 percent of the market for both types of equipment, the analyst added.