Lessons For Elon Musk: 5 Notorious Failed Hostile Takeovers

Zinger Key Points
  • Netflix's "poison pill" kept Carl Icahn from an attempted takeover.
  • Xerox offered HP shareholders free dinner at a fancy restaurant.

As any student of industry knows, Elon Musk is hardly the first person to attempt a hostile takeover. But while the Tesla TSLA chieftain’s $54.20 per share bid for Twitter TWTR continues to resonate, let’s pause to consider earlier attempts at hostile takeovers by well-respected and well-financed entities and individuals that — to ransack some Musk-worthy clichés — took off like a rocket ship but eventually vanished like a wisp of blunt smoke.

Hewlett Packard’s Failed Takeover of PricewaterhouseCooper: In September 2000, HP Inc HPQ sought to expand its technology advisory services by acquiring PwC’s consultancy unit for $18 billion.

But two months after making its unsolicited bid, HP abruptly walked away after failing to secure any common ground with PwC. HP Chairwoman and CEO Carly Fiorina lamented that because of “the current market environment, we are no longer confident that we can satisfy our value creation and employee retention objectives — and I am unwilling to subject the HP organization to the continuing distraction of pursuing this acquisition any further.”

Two years later, HP’s executives received a surprise call from PwC. It seemed that HP’s rival IBM IBM was making a bid for PwC’s consulting unit for $3.5 billion, a considerably lower sum than HP offered, and PwC wanted to see if HP was interested in picking up from where it was previously disconnected. Juergen Rottler, vice-president of marketing of strategy and alliances at HP Services, told ComputerWeekly.com that HP was not eager to pick up where it left off.

"I don't know the exact number and talks never really got down to that level, but it was in the same ballpark as what IBM is offering," he said.

Microsoft’s Failed Takeover of Yahoo!: In February 2008, Microsoft Corporation MSFT made an unsolicited $44.6 billion bid for Yahoo! Inc., with Microsoft CEO Steve Ballmer insisting the “combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners.”

Yahoo!, however, begged to differ and said the offer was too low. Microsoft threw another $5 billion into the offer, but Yahoo!’s leadership piled on new demands to the would-be buyer while holding highly publicized talks with News Corp NWS. Unwilling to engage in a proxy fight, Microsoft withdrew its offer after three months with Ballmer grumbling that “the economics demanded by Yahoo do not make sense for us.”

However, investor Carl Icahn had spent $1 billion on Yahoo! stock and accused the company of being "irresponsible" in rejecting Microsoft. Icahn teamed with another deep-pocketed investor, T. Boone Pickens, in a revolt against Yahoo!, but the company pacified Icahn by expanding its board to accommodate him and two of his hand-selected candidates.

Yahoo! was eventually acquired in 2016 by Verizon Communications VZ for $4.83 billion.

Roche’s Failed Takeover Of Illumina: In January 2012, Switzerland’s Roche Holdings AG RHHBY, a maker of cancer treatment pharmaceuticals, offered $6 billion to acquire Illumina, Inc. ILMN a San Diego-based biotechnology firm specializing in gene sequencing.

Roche tried to play hardball with Illumina, which surprised its would-be predator by pointedly rejecting its offers, even as Roche hinted it was willing to increase the offer Illumina CEO Jay Flatley dismissed as “inadequate.”

Roche withdrew after three months when Illumina shareholders voted to reject the Swiss company’s candidates for their board of directors and the Roche requested to expand the board’s size. Roche CEO Severin Schwan commented his company would “continue to consider options and opportunities to develop further its portfolio of businesses in order to expand its diagnostics leadership position.”

Fast-forward eight years and Roche announced it signed a 15-year partnership with, of all companies, Illumina — which happened after Roche’s planned $1.2 billion merger with Pacific Biosciences PACB fell through over regulatory concerns. Francis deSouza, who succeeded Flatley as Illumina’s CEO, stated he was excited that his company “has selected Illumina’s sequencers as their platform of choice to accelerate the adoption and broaden the reach of oncology-based, distributable IVD [in vitro diagnostics] tests into clinical care.”

See Also: Benzinga's Stock Wars: The Complete Series

Carl Icahn’s Failed Takeover Of Netflix: In the autumn of 2012, Icahn was back to his corporate raider routine, this time casting his eye on Netflix Inc NFLX. In October of that year, Icahn revealed in a filing with the U.S. Securities and Exchange Commission that he acquired a 9.98% stake in the streaming service.

The Netflix leadership, to borrow a cinematic expression, had already seen that film and knew how it could end. On Nov. 2, the company’s board of directors adopted a “poison pill” plan designed to flood the market with new shares in the event someone acquired a greater than 10% stake in the company.

Icahn was caught off-guard by the company’s action and complained in a CNBC interview that the “poison pill” strategy against him was “really reprehensible.” While he hinted a hostile takeover was "certainly an alternative," Icahn never made good on his threat and held his Netflix shares until June 2015 when he sold them for $2 billion — he paid $321 million in 2012 for that stake.

Xerox’s Failed Takeover Of HP: In November 2019, the leadership of Xerox Holdings Corp. XRX, which came into authority through Icahn’s machinations earlier in the year, made an unsolicited takeover $33.5 billion bid for HP.

Two weeks after the offer was announced, HP’s President and CEO Enrique Lores and Chairman Chip Bergh sent a letter to their Xerox counterparts calling attention to the “decline of Xerox’s revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects.”

Xerox didn’t quite get the hint and made increasingly aggressive overtures, raising the price of its asking price and even offering to take HP shareholders out for a free dinner at a fancy restaurant in the ritzy New York City suburb of Greenwich, Connecticut.

Xerox’s pursuit continued until March 2020 when it suspended its efforts as the COVID-19 pandemic took root. Xerox officially dropped HP from its crosshairs in April 2020, and its later M&A activity would be limited to smaller, privately held companies.

Photo: ToNic-Pics / Pixabay

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