HP-Compaq Upate: It ain't over till it's over
- By John K. Waters
[UPDATED MARCH 20, 2002] - Votes are being counted as shareholders judge Hewlett-Packard Co.'s planned $22 billion acquisition of Compaq Computer
Corp. After months of public brawling and behind-the-scenes maneuvering-
featuring HP CEO Carly Fiorina, who set up the deal and has staked her
career on it, and rival Walter Hewlett, son of the company's co-founder
who has lead the not-so-friendly opposition-the biggest deal in the
history of the computer industry will be either done or dead.
The board of directors of Hewlett-Packard Company Tuesday announced that based on a preliminary estimate of shareowner proxies by its proxy solicitor, it believed it had received enough votes to approve HP's merger with Compaq. The company acknowledged that this is not yet a certified victory.
HP held its shareholders meeting in Cupertino, Calif., on Tuesday,
while Compaq shareholders cast votes Wednesday in Houston.
The results of those meetings may take a few days to sort out, officials
said. The voting process looks to be a messy affair as shareholders can
recast and change their votes as long as the "polls" remain open. Voters
sending in proxy cards (white for yeah, green for nay) can send in
multiple cards, reversing their votes several times. (It's the last vote
that counts.) And big investors and institutional shareholders have been
known cast votes in the last few hours of the process.
Although preliminary numbers from the proxy votes, which are sent to
solicitors and will be closely monitored by both sides, will be available
before the stockholders meetings, the final count might even be weeks
away. The vote will be tallied by IVS Associates Inc., a small Newark,
Del.-based firm that specializes in shareholder vote tabulations. The
company's tabulations typically take several weeks, according to company
"Most analysts predict that the vote will be very close, so each side will
use every tool available to win," wrote Mike Elgan, editorial director of
Interex, an HP enterprise users group, in a recent article on the group's
Web site ("Return of the Chads?," http://www.interex.org).
more hanging-chad-like controversy, accusations of stolen outcomes,
'snippy' public exchanges between combatants and possibly even a lawsuit
or two. Even in a best-case scenario, one without a close or disputed
outcome, the final results won't be known for several days at least, and
possibly not for more than a week."
Shareholder Interex said this week it would vote in favor of HP
Whatever the vote, observers say the outcome may be challenged by the
losing side, a development that could keep the fight going even longer.
Walter Hewlett has argued that IT mergers are risky propositions with a
long history of failure, that acquiring Compaq will increase HP's
reliance on a slumping PC market, and that acquisition is likely to
distract HP from its profitable printing and imaging business.
Fiorina has said that acquiring Compaq is HP's best move in a highly
competitive market, allowing both companies to leapfrog into a leadership
spot in many sectors. The merger will allow the combined organization to
offer one-stop shopping to large customers, creating a viable competitor
to IBM, she says.
Currently, more than 20% of HP shares--18%-plus controlled by the Hewlett
and Packard families-are committed to opposing the merger. Institutional
investors, including Bank of America Capital Management Inc., Wells
Fargo & Co., Brandes Investment Partners LP, and the pension fund of the
California Public Employees' Retirement System (CalPERS) are also against
Walter Hewlett is the only member of HP's board to oppose the deal.
Other board members have made statements in recent weeks signaling their
support for the merger. And shareholders on the pro side include Alliance
Capital Management Holding LP, Putnam Investments Inc. and Barclays Bank
PLC, who account for around 6% of HP's outstanding shares.
Adding weight to the pro side was the recently announced recommendation
from Institutional Shareholder Services Inc. (ISS) that its subscribers
vote for the acquisition. ISS subscribers own 23% of HP's shares. Still,
some of those opposing the deal, including CalPERS, are ISS clients.
As of now, the outcome of the much-anticipated vote is still anyone's
John K. Waters is a freelance writer based in Silicon Valley. He can be reached