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2022-03-28 17:07

HP Inc. stock closed down about 2.50% after the company signed a formal deal to buy Poly for $40 per share in cash ($1.70 billion),assuming a total enterprise value of $3.3 billion, including Poly's total debt. HP's objective to build a more growth-oriented portfolio is accelerated by this purchase, which increases the firm's industry potential in hybrid work solutions and prepares it for protracted sustainability and value creation.

With the advent of hybrid work, there is a huge requirement for technology that allows for seamless collaboration across home and office settings. Around 75% of office workers are investing in their home settings to enable new ways of working. Traditional office facilities, with a plan to find room solutions, are also being rebuilt to facilitate hybrid work and collaboration. There are more than 90 million rooms in the world today, but only around 10% of them have video capabilities.

CEO Enrique Lores’ remarks
Therefore, by 2024, the market for office meeting room solutions is predicted to quadruple. Enrique Lores, President and CEO of HP said:

“The rise of the hybrid office creates a once-in-a-generation opportunity to redefine the way work gets done. Combining HP and Poly creates a leading portfolio of hybrid work solutions across large and growing markets. Poly’s strong technology, complementary go-to-market, and talented team will help to drive long-term profitable growth as we continue building a stronger HP.”

Poly will contribute to HP's peripherals and workforce solutions companies' expansion and scalability. Peripherals are a $110 billion market with a 9% annual growth rate, fueled by the demand for more unique experiences.

As firms invest in digital services to set up, manage, and secure more remote IT environments, workforce solutions represent a $120 billion market opportunity that is rising at an annual rate of 8%. Poly's devices, software, and services, when combined with HP's strengths in computation, device management, and security, result in a strong hybrid meeting solution portfolio.

HP to realise revenue synergies
At closure, HP anticipates the deal to be primarily attributable to revenue growth, margins, and non-GAAP EPS (Earning Per Share). HP intends to realize significant revenue synergies in peripherals, meeting rooms, and workforce solutions because of the increased value proposition of a complete hybrid work solution, combined with HP's size and go-to-market capabilities. By merging Poly's products with HP's PC portfolio, HP will be able to cross-sell throughout its worldwide business and consumer sales channels, resulting in increased sales.

As an outcome, HP aims to generate $500 million in revenue synergies by FY25, as well as increase Poly's revenue growth to a 15% CAGR in the first three years after the deal closes. Furthermore, HP anticipates the purchase to boost Poly's operating margins by about six percentage points by FY25, thanks to scale economies in the supply chain, manufacturing, and overhead.

The deal is scheduled to close by the end of calendar year 2022, pending approval by Poly stockholders, regulatory approvals, and the fulfilment of other normal closing conditions. HP will fund the transaction with a mix of cash on the balance sheet and additional debt.