Merger Votes Set for March

 
 
By eweek  |  Posted 2002-02-05 Email Print this article Print
 
 
 
 
 
 
 

HP and Compaq shareholders will vote on the companies' controversial buyout plan March 19 and 20.

Hewlett-Packard Co. and Compaq Computer Corp. will put their controversial merger to votes on March 19 and 20, giving shareholders final say as to the fate of the $25 billion deal. Based on the merger agreement announced in September, HP and Compaq must garner the support of more than 50 percent of its shareholders in order to proceed with the deal.
While Compaqs shareholders are widely expected to back the buyout, HPs vote remains far from certain, with heirs of the companys late co-founders lobbying stockholders to reject the deal.
HP Chairman and CEO Carly Fiorina and her counterpart at Compaq, Michael Capellas, have staked their careers on the widely-criticized merger that would see HP absorb long-time rival Compaq. Both companies have struggled over the past year with declining sales and plummeting profits, blamed largely on a U.S. recession. But those recent troubles have underscored industry analysts concerns about their future viability in an increasingly competitive industry. In first announcing the deal, Fiorina and Capellas touted it as creating a powerful new competitor in the high-tech arena. "At a particularly challenging time for the IT industry, this combination vaults us into a leadership role with customers and partners," Fiorina said at a Sept. 5 news conference.
Investors and analysts quickly condemned the deal, initially sparking a sell-off in the stock of both companies that sent shares tumbling to multiyear lows, although share prices have largely recovered in recent months. But the most serious threat to derail the merger came in November when Walter Hewlett, son of HP late founder William Hewlett and a member of the companys board, publicly announced his opposition to the deal. Hewlett argued that absorbing Houston-based Compaq would increase HPs exposure to the "unattractive PC business" and weaken shareholders stake in the profitable printer business, where HP, of Palo Alto, Calif., stands as the industry leader. In early December, heirs of the companys other late co-founder, the Packard family foundation, declared that they, too, would vote against the merger. Together, the Packards and Hewletts control about 17 percent of HPs voting stock, significantly reducing the companys chances of securing the more than 50 percent support of shareholders to proceed with the deal. Over the last two months, HP and Hewlett have engaged in an increasingly bitter campaign to sway shareholder opinions, with HP questioning Hewletts motives, denouncing his failure to attend board meetings to discuss the deal and criticizing the heir for not offering a viable alternative. Hewlett has lashed back, alleging that he was initially pressured into joining a unanimous board vote to support the merger, as well as denouncing statistical data presented by HP as inaccurate and misleading. Many analysts expect the clash to intensify as the vote draws nearer. HP shareholders will gather to vote on March 19 at the Flint Center in Cupertino, Calif. Compaq stockholders will vote a day later at the Wynham Greenspoint Hotel in Houston.
 
 
 
 
 
 
 
 
 
 
 

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