“I think a combination is a no-brainer,” Icahn told the Wall Street Journal.
“I believe very strongly in the synergies ... there here will probably be a choice between cash and stock and I would much rather have the stock, assuming there’s a good management team.”
Icahn owns 10.6% of Xerox stock and revealed a 4.24%, $1.2-billion stake in HP on Thursday to the Journal.
“I’ve found over the years that these types of companies that are in shrinking industries tend to decline much more slowly than many market participants may predict, while continuing to generate substantial amounts of cash,” he said, adding that HP might benefit from activism.
Xerox, HP's Merger Prospects
Earlier this month, Xerox made a $33-billion buyout bid for HP. Analysts have posited a reversal of roles, as Xerox’s market value is just one-third of HP’s. Icahn said he is not married to a particular structure.
Both companies have announced cost-cutting measures — $640 million at Xerox and $1 billion annually at HP — as they struggle to stay afloat in a world designed to print less.
The bidder has proposed savings of more than $2 billion and sees complements between their printer portfolios.
Just last year, Icahn derailed a Xerox merger with Fujifilm Holdings Corp. He took control of the board and refreshed the leadership with new CEO John Visentin.
The group has been eyeing HP since it posted poor earnings in February.
Icahn’s newly disclosed stake in HP gives him sway to maneuver both companies toward his desired end.
HP Acknowledges Icahn's Stake
Mergers aren’t the only things on Icahn’s mind. The activist investor also sees opportunities for HP in software services, artificial intelligence and 3D printing.
“We are aware of Carl Icahn’s investment and are committed to doing what is in the best interests of all HP shareholders,” HP said in a Wednesday statement.
HP shares were trading 2.4% higher at $20 in Thursday's premarket session, while Xerox shares were up 1.68% at $38.23.