Xerox Holdings Corp. (XRX) is considering making a cash-and-stock offer for HP Inc. (HPQ), a company with market value over three times its own, according to sources speaking with The Wall Street Journal.

According to the report, the Xerox board talked about the possibility on Tuesday, and any bid would be at a premium to HP's stock price. The sources added that the copy machine manufacturer has received an informal funding commitment letter from a major bank and a merger could cut $2 billion in costs.

HPQ shares, which are down 10% this year, were lifted 9.7% by the news in pre-market trading.

The news comes a day after Xerox ended an almost two-year long dispute with Fujifilm. Last year Xerox terminated a deal to be acquired by Fujifilm for $6.1 billion after activist investors Carl Icahn and Darwin Deason said it undervalued Xerox. This prompted the Japanese firm to sue for damages. Fujifilm has now withdrawn the litigation it filed and will acquire Xerox's stake in the companies' 57-year-old joint venture. This will add $2.3 billion to Xerox's coffers.

Founded in 1906 as the Haloid Company, Xerox is synonymous with photocopying in most parts of the world. However, the Norwalk, Connecticut-based firm is struggling to maintain its relevance as customers adopt a paperless lifestyle. HP, which was formed in 2015 when Hewlett-Packard was divided into two different companies, faces a similar problem as its dependence on its printing supplies business has grown. In October, it announced it would layoff 16% of its workforce to save $1 billion in annualized costs by the end of fiscal 2022. The Journal noted that bankers expect old giants like Xerox, HP and Japan’s Canon Inc. to be "primed for consolidation" due to the rapidly changing tech landscape.

However, Xerox shares have staged a remarkable comeback in 2019 and are up 84% year-to-date on the back of the firm's dynamic new strategy. “By simplifying our operations, instilling a culture of continuous improvement, investing in growth areas and capitalizing on new and adjacent market opportunities, we anticipate that we can achieve flat to growing revenue by 2021, while driving continued annual adjusted earnings per share expansion, including at least $4.00 of adjusted earnings per share in 2020, and delivering over $3 billion of cumulative free cash flow over the next three years,” said John Visentin, Xerox vice chair and CEO, at Investor Day in February. Visentin was appointed by Icahn amid the 2018 Fujifilm tussle. Icahn has a close to 11% stake in Xerox and began his activism at the company in 2015.