|
HP-Compaq proxy fight heats up
|
 |
December 19, 2001: 6:28 p.m. ET
Execs take their show on the road, focus on debunking opposition.
By Staff Writer Richard Richtmyer
|
NEW YORK (CNN/Money) - The controversy surrounding the proposed merger of Hewlett-Packard and Compaq intensified Wednesday as proponents of the deal pitched their idea in a letter to shareholders accompanied by a ream of material they say proves it makes sense.
Nine of the 50 pages of accompanying material are aimed at debunking the opposition raised by Walter Hewlett, who has launched a proxy fight against the proposed transaction.
Hewlett, the son of one of HP's co-founders, is the most vocal of a group of shareholders that has come out against the proposed $22 billion deal.
The board of the David and Lucille Packard Foundation, which holds nearly 10 percent of HP's stock, earlier this month said it will likely vote its shares against the deal. The Packard foundation is headed by Susan Packard Orr, one of the daughters of company co-founder Dave Packard.
David Woodley Packard, the son of HP's co-founder, also has said the Packard Humanities Institute, of which he is chairman and which owns 25 million HP shares, or 1 percent of the company, also likely will vote against the transaction when it is put to the shareholders.
Together, the opponents of the deal hold roughly 18 percent of the stock. Their opposition to the deal stems largely from concerns that it would increase HP's exposure to the flagging PC industry and low-end server business while jeopardizing its strong position in the printing and imaging business.
They also have been critical of the number of HP jobs that would likely be eliminated as a result of the merger, which they have pegged at roughly 15,000.
In the letter, the CEO of Hewlett-Packard, Carly Fiorina, and Compaq's CEO, Michael Cappelas, said Walter Hewlett's opposition to the deal is "based on a static and narrow view of HP and the industry," selectively ignores the potential benefits of the transaction and relies on "faulty financial assumptions."
The executives also point out that he offers no alternative solutions.
"While we certainly respect the right of the Hewlett and Packard heirs to express their views, we ask you to keep in mind that their motivations and investment interests may be very different from your own," they said in the letter.
In the material supporting the deal, the companies say it is necessary in order for them to become stronger players in business computing, Internet access devices and printing, and will save $2.5 billion a year.
They assert that HP's fiscal 2003 operating earnings per share would rise 13 percent following a merger, which they argue would create value that exceeds the premium paid for Compaq.
A spokesman for Walter Hewlett told CNNfn Wednesday that he has been meeting with investors to try to win their support "and has been very well received."
"We believe that it is the H-P position that relies on faulty financial assumption and analysis," the spokesman said.
Separately, a lawyer for HP denied Wednesday that the company's top leaders have threatened to resign if shareholders do reject the merger plan.
Responding to a letter from Hewlett's lawyer that expressed concern over a New York Times report implying that top HP board members would step down if the Compaq deal falls through, HP attorney Larry W. Sonsini said such assertions are "incorrect and misleading."
"Your speculation about what a Hewlett-Packard Board Member might do pending the outcome of the merger vote, is just that, speculation," Sonsini said in the letter, filed with the Securities and Exchange Commission Wednesday.
"Any assertion that a Hewlett-Packard Director or member of management is making a threat to resign or has made a decision to do so, is incorrect and misleading," the letter said. 
|
|
|
|
|
|
|
