Activist investor Carl Icahn has bought a US$1.2 billion stake in HP Inc and is pushing for the personal computer maker's merger with printer maker Xerox Corp, arguing that a union could yield big profits for investors, the Wall Street Journal reported on Wednesday.
Icahn, who owns a 10.6 per cent stake in Xerox, now owns a 4.24 per cent stake in HP, the Journal said.
An HP spokesperson said the company is aware of Icahn's investment and is committed to doing what is in the best interests of all HP shareholders. HP did not disclose how much stake Icahn owns in the PC maker.
Xerox made a roughly US$33 billion cash-and-stock offer for HP, a company more than three times Xerox's size, Reuters reported last week. HP confirmed the bid, but has not disclosed the offer price.
"I think a combination is a no-brainer," Icahn was quoted as saying by the Journal.
"I believe very strongly in the synergies," he said, adding that "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."
Xerox believes it can achieve at least US$2 billion in annual cost synergies by creating an office technology supplies giant, one source has said.
The billionaire told the Journal that his team began looking at HP in late February and he bought the company's shares from late April to mid-August, though he did not have a deal with Xerox in mind when he started accumulating the shares.
Icahn said he believes a combined company is in the best interests of both sets of shareholders given the potential for cost savings and to market a more balanced portfolio of printer offerings, the WSJ reported.
This is not the first deal that Icahn has tried to orchestrate by having a small company buy a bigger one.
In June, US casino operator Eldorado Resorts Inc agreed to acquire larger peer Caesars Entertainment Corp for US$17.3 billion, including debt. Icahn had earlier gained seats on the board of Caesars.
Icahn and Xerox did not immediately respond to requests for comment.
(Reporting by Maria Ponnezhath and Anurag Maan; Editing by Subhranshu Sahu and Shailesh Kuber)