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Hewlett-Packard Co. plans to pay about $575 million to more than 6,000 employees to dissuade them from abandoning their jobs should the company complete its $25 billion buyout of Compaq Computer Corp.
The retention agreements are designed to assure that key executives and employees will stay on at the merged HP for at least a year to help oversee the integration of the two computer makers.
The potential erosion of talent was made further evident yesterday as rival Dell Computer Corp. announced it had hired away Compaq executive Jeffrey Lynn to head its technology consulting efforts. Lynn held a similar post at Compaq.
Overall, about $33.1 million would go to 10 HP executives, $22.4 million to seven Compaq executives and the rest to unspecified employees of both companies.
HP Chairman Carly Fiorina and Compaq Chairman Michael Capellas both declined to participate in the retention program, according to the report, a copy of which was obtained from the Securities Exchange Commission.
In its latest of several reports it has issued on the proposed merger since it was first announced in September, HP offered its most detailed account yet as to some of the costs involved in integrating the two companies. In addition, HP outlined its arguments in favor of the deal, which it contends will result in $2.5 billion annual cost savings in 2004.
Having been blessed by the boards of both companies, the mergers future now rests with the companies shareholders, who will vote in the coming weeks on whether to proceed or abandon the deal. Specifically, each company must secure the support of more than 50 percent of their shareholders.
Meanwhile yesterday, the leading opponent of the merger, HP heir Walter Hewlett, issued another report denouncing the deal. As the leading opponent to the deal, Hewlett has been heavily lobbying shareholders to reject the deal.
Overall, the dissident HP board member and son of late company co-founder William Hewlett once again outlined the perceived faults with the merger, which he contends is a strategic mistake that will cost the company, and stockholders, millions of dollars.
Overall, industry analysts believe Compaq shareholders will vote overwhelmingly in favor of the deal but view HPs vote as a tossup, due in large part to the highly publicized anti-merger campaign led by Hewlett.
About a month after the merger was announced in September, Hewlett publicly denounced the deal and vowed to lead efforts to kill it.
In early December, Hewlett, whose family controls about 5 percent of company stock, gained the key support of the Packard family foundation, HPs largest shareholder, which controls about 12 percent of the company stock.
The debate between the two sides has become increasingly bitter in recent weeks, with both parties questioning each others analytical findings and motivations.
As to when the voting will begin remains unclear. While HPs report outlined the voting procedures that will be used to poll shareholders, it gave no indication as to when the actual voting will take place.