After pursuing a merger with HP (NYSE:HPQ) for months, Xerox Holdings (NYSE:XRX) on Tuesday called off its proposal to acquire its rival. Xerox originally proposed the merger last fall but had been rejected by HP despite the backing of some shareholders of both companies.

In a statement issued Tuesday, Xerox said, "The current global health crisis and resulting macroeconomic and market turmoil caused by COVID-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP. ... While it is disappointing to take this step, we are prioritizing the health, safety and well-being of our employees, customers, partners and other stakeholders, and our broader response to the pandemic, over and above all other considerations."

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This isn't the time for debt

HP management had been against the deal, saying that Xerox was significantly undervaluing the business and that the combined company would create a highly leveraged balance sheet with too much debt. Xerox had secured financing for up to $24 billion in new debt to finance the acquisition of its larger rival.

Before the recent downturn in the markets, HP stock had significantly outperformed Xerox over the last few years. But Xerox has made strides lately to improve margins and that had the shares drifting higher in recent months leading up to the market sell-off.

It's unclear whether a deal could resurface later when the economy recovers. In the update issued on March 31, Xerox stated, "There remain compelling long-term financial and strategic benefits from combining Xerox and HP."