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There is no way Xerox can make a deal to buy HP



There is no way for Xerox to actually complete a reported deal to buy HP, CNBC's Jim Cramer argued Wednesday.

That doesn't mean the two companies coming together is a bad idea, Cramer said, but Xerox's cash and stock offerings probably wouldn't cut it.

"In its current configuration, there is really no way Xerox can pull this off," said the host "Mad Money".

The reason is pretty straightforward. "Xerox is a $ 8 billion business. HP is a $ 29 billion business," Cramer said.

But there is another story about HP trying to buy Xerox, and "one that investors are obviously thinking about, because both stocks met today," Cramer said.

Xerox rose around 3.5% to $ 37.66, while HP went up around 6.3% to $ 1

9.57.

Cramer said that there are natural synergies between the companies. They sell into the same markets, he said, and a combination would allow them to "cherry-pick the best sellers" and cut costs.

But the fact that a deal makes sense doesn't mean it will go any further, Cramer is warned. It's especially important not to buy shares simply because of speculation about a takeover, he said.

To begin with, HP's new CEO, Enrique Lores, is likely to want to avoid such a significant deal early in his tenure, Cramer said. [19659002] "Although Xerox has some proprietary businesses, it has pretty much the kind of business that HP is moving from," Cramer added.

Still, the transaction is probably not far, Cramer says, but the host is recommended to sell HP to its current strength.

"I think it will have trouble hitting its numbers," he said. "If you want, you can take the profits and plow them into Xerox. It has cash, it pays you a return of nearly 2.7%, and the stock sells for only 9 times its earnings. I see no harm in owning this. " [19659002] In general, Cramer said he is for multiple mergers – when they make sense and are probable.

"The more deals we get, the higher the stock market goes," Cramer said. "These transactions reduce the supply of floating stocks, and everything that takes out supplies is good news, especially if it is sought to buy back new shares."

For example, he said that LVMH acquires Tiffany is one that he favors, which long "LVMH offers a reasonable price."

Another consolidation Cramer said he would like to see is Uber downloading the food delivery business to rival GrubHub or DoorDash.

Cramer said he believes Uber's share would rise from $ 26 to $ 36 dollars, plus the share to the acquirer will benefit as well.

"Anything that takes out a rival will benefit the entire industry," he said, noting cloud-based marketing and cyber security companies could benefit from consolidation.

That's why Cramer said it's a positive sign to hear increased conversation around potential deals.

"But I don't feel compelled to speculate on these potential deals," he said. "For the most part, it's a mug game."


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