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EU approves HP-Compaq
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January 31, 2002: 2:11 p.m. ET
Europeans give all clear, Compaq calls it "important milestone."
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NEW YORK (CNN/Money) - European regulators Thursday approved Hewlett-Packard Co.'s plan to buy Compaq Computer Corp. without conditions, giving a much needed boost to the controversial $25 billion deal - the biggest in the computer industry if it is completed.
The European Commission, the executive body of the European Union, said the deal does not raise competition concerns in Europe. The regulatory agency didn't demand any adjustments to the deal.
"A careful analysis of the merger ... and of the competitive forces in the markets concerned has shown that HP would not be in a position to increase prices and that consumers would continue to benefit from sufficient choice and innovation," the commission said in a statement issued in Brussels.
The approval bolsters the prospects for completing a deal that has run into strong opposition from the descendants of HP's founders.
"This is an important milestone, particularly given the significance of Europe to us," Compaq CEO Michael Capellas said in a statement after the decision was announced. "We will continue to work with regulators around the world in satisfying their requirements."
The U.S. Federal Trade Commission is still weighing the deal, which was announced in September.
Clearance from regulators is not the final hurdle for the combination. A shareholder vote on what would be the biggest deal ever announced in the PC industry is expected in March, and the outcome is far from certain.
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Palo Alto, Calif.-based Hewlett (HWP: up $0.15 to $22.11, Research, Estimates) and Houston-based Compaq (CPQ: up $0.36 to $12.35, Research, Estimates) submitted their merger for review to European regulators in late December.
The EC last year blocked General Electric Co.'s (GE: Research, Estimates) proposed purchase of Honeywell International Inc. (HON: Research, Estimates) due to antitrust concerns.
The deal has run into fierce opposition from HP director Walter Hewlett -- the son of company co-founder William Hewlett -- and other shareholders.
Walter Hewlett has launched a proxy battle to stop the deal and began meeting with institutions that own the computer makers' stocks in December. Around that time, the David and Lucille Packard Foundation, owner of about 10 percent of HP, made a preliminary decision to vote against the merger. Combined, the Packard Foundation and other heirs opposed to the deal own roughly 19 percent of HP's shares.
Hewlett reiterated Thursday his opposition against the merger, calling the integration risk from the combination substantial and unacceptable. "We believe HP can make far better strategic moves on its own for a lot less than $25 billion," he said in a statement.
Hewlett also pointed out that HP's rivals have raised no objections to the proposed merger. "We believe Dell, Sun and IBM must be delighted at the prospect of a merger that would so greatly distract and damage two of their rivals," he said. 
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