Canon threatens to end $5bn-a-year relationship with HP, as Xerox's bid is rejected

Canon supplies components for laser printers to HP, but says this relationship would have to end if Xerox pushes through its acquisition

Canon will bring its long-standing relationship with HP to an abrupt end if HP merges with Xerox, CEO Fujio Mitarai has said.

The collaboration sees the Japanese vendor provide laser jet components to HP, which rakes in around $5bn (£3.9bn) of sales a year.

But Canon and Xerox compete in the multi-function printer and copier markets, and Mitarai told Nikkei Asian Review that the 35-year relationship will be ended if Xerox gets its way, leaving HP to source another supplier.

"The foundation of this partnership is, above all else, built on a relationship of trust between the top management of both companies," he said, referring to his relationship with HP CEO, and former print boss, Enrique Lores and current print president Tuan Tran.

"At the same time, it also involves a great deal of technological exchange gradually established over the decades-long relationship.

"[It] is not something built overnight."

Last month HP boss Lores said he believes the vendor only has around a 10 per cent business crossover with Xerox, whereas Xerox and Canon compete more directly in the copier space.

HP shipped the most printers in Q4 last year, according to IDC, at 9.8 million units. Canon and Epson followed with shipments of 5.4 million and 4.8 million respectively.

Meanwhile HP has, as expected, rejected Xerox's unsolicited takeover bid, citing reasons already made public.

It claims that Xerox's bid undervalues HP and its assets, and would be less lucrative to shareholders than HP's own transformational plan, which will see it buy back billions of dollars' worth of shares.

HP board chair Chip Bergh said: "Our message to HP shareholders is clear: the Xerox offer undervalues HP and disproportionately benefits Xerox shareholders at the expense of HP shareholders.

"The Xerox offer would leave our shareholders with an investment in a combined company that is burdened with an irresponsible level of debt and which would subsequently require unrealistic, unachievable synergies that would jeopardise the entire company."