Starteepo, a major shareholder in Xerox, is pushing the printer and business technology company to take steps to unlock value, including a strategic review of its financial services operation and a significant reduction in leverage, according to a report by Bloomberg.
The report cites a statement and letter sent to the Xerox board as revealing that the Prague-based alternative investment manager, led by investor Frantisek Bostl, has built a 7.34% stake in Xthe business.
Starteepo is calling for greater transparency around Xerox’s financial services business, which provides financing for customers purchasing its products. The investor wants the unit’s financial performance to be reported separately and for management to outline its strategy by the company’s third-quarter results.
It is also urging Xerox to appoint advisers to conduct a formal strategic review of the division. Options proposed by Starteepo include a joint venture, a strategic capital partnership, a sale of the business or alternative financing arrangements.
Bostl argues that Xerox’s financial services operation could be worth as much as $7.69 a share — more than twice the company’s current share price — if its value were better recognised by investors.
Starteepo also wants Xerox to focus on deleveraging and adopt a more disciplined approach to capital allocation. It has proposed an “optimised” capital structure under which a third party could provide funding for the financial services portfolio while Xerox retains its servicing infrastructure and customer relationships.
The investor estimates that implementing its proposals could ultimately result in equity value of $3.3bn, equivalent to more than $18 a share.
Xerox shares rose as much as 6.9% to $3.55 in early New York trading on Tuesday before paring gains to $3.38. The stock had fallen around 13% over the previous year, leaving the company with a market capitalisation of roughly $418m.
Starteepo first disclosed a significant Xerox position in May, describing the company as an attractive investment opportunity, and increased its holding further in July.
Bostl said Xerox’s underlying business had improved over the previous four months, but argued that the company’s enterprise value had failed to reflect that progress and had fallen below the level when Starteepo first disclosed its investment.
The campaign comes as Xerox faces renewed scrutiny of its balance sheet and capital structure. Hedge fund Converium Capital said in June that it saw value in Xerox’s bonds, arguing that the company’s debt was mispriced because of what it described as a complicated capital structure and balance sheet.
Starteepo’s campaign also echoes an earlier activist battle at Xerox involving Carl Icahn. Icahn pushed the company to pursue strategic alternatives and operational improvements from 2015 and secured three board seats after Xerox announced plans to separate its hardware and services operations. Icahn ultimately sold his remaining Xerox stake back to the company for $542m in 2023.
Starteepo, which was founded in 2017, has previously invested in companies including Warner Bros. Discovery and Western Digital.
