ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintTitle ChevronIcon Twitter
Business deals

Canon to cut ties with HP if Xerox takes over

Hostile bid would create formidable rival to longtime Japan partner

Canon has supplied parts for HP for more than 30 years, but this could change after a hostile takeover bid by Xerox.   © Reuters

TOKYO -- Canon will end its 35-year relationship with HP if Xerox takes over the U.S. office equipment maker, CEO and Chairman Fujio Mitarai told Nikkei.

Xerox launched a hostile takeover bid Monday for all outstanding HP shares, the latest development in a monthslong push to acquire its rival.

HP, which buys laser-printer components from Canon, is among the Japanese manufacturer's biggest customers, generating nearly 14% of its sales. But a takeover by Xerox would create a formidable rival to Canon's own office equipment business.

"The foundation of this partnership is, above all else, built upon a relationship of trust between the top management of both companies," including HP CEO Enrique Lores and Tuan Tran, head of its printing division, Mitarai said in a written interview.

"At the same time, it also involves a great deal of technological exchange gradually established over the decades-long relationship." Mitarai added that such a relationship "is not something that can be built overnight."

Sales to HP contributed about 540 billion yen ($5.01 billion at current rates) of Canon's 3.95 trillion yen in 2018 revenue, so the loss from cutting ties would not be small. But Xerox's hostile takeover threatens to create a competitor with roughly double the Japanese company's annual sales. 

Canon CEO Fujio Mitarai said it would be difficult to recreate the relationship of trust the Japanese company has with HP's current leadership. (Photo by Manami Yamada)

Mitarai's comments appear meant to dissuade Xerox's move. Losing Canon as a supplier would force HP to seek another source for key parts.

Canon has not disclosed the terms or length of its current supply agreement with HP.

Mitarai said Canon "intends to partner with and strive to advance collective interests of organizations that have a strong track record of operating with integrity and clearly share our values." 

Competition is expected to intensify in the shrinking market for copiers, multifunction printers and other office equipment.

Canon and Japanese peers Ricoh and Konica Minolta each hold a roughly 15% share of the global market for these devices. Xerox and Fuji Xerox, a joint venture between the U.S. company and Fujifilm Holdings, had the scale to rank in the top three, but their partnership agreement limited each company to certain regions.

Fujifilm acquired Xerox's stake in the venture in November, and the partnership is set to expire next year.

This was among the factors that drove Xerox's overtures to HP. The customer bases of the two companies have little overlap, with Xerox focusing on businesses and HP on consumers.

HP turned down an acquisition offer by Xerox in November, leading to Monday's takeover bid. HP is taking steps to keep investors on its side, including announcing plans for $16 billion in shareholder returns, mainly share buybacks.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more