HP Board Member Sees Major Investors Behind Merger
Mon Mar 11, 5:59 PM ET
By Peter Henderson
SAN FRANCISCO (Reuters) - A Hewlett-Packard Co. board member, responding to the latest defection of a major investor from management's plan to buy Compaq Computer Corp., said on Monday most top shareholders were behind the plan.
But Phil Condit, chairman of airplane maker Boeing Co. and an HP board member who advocates the $23 billion deal, declined to say management had a lock on winning the March 19 vote.
Condit and fellow board member Sam Ginn, former chairman of Vodafone, also revived speculation that board members and management could resign if shareholders voted down the hotly contested merger, threatening hopes HP could continue business as usual if it left Compaq alone.
However, neither director declared he had decided to resign, and Ginn said, "I won't walk away and pout," but would line up a replacement if he left, which merger opponent Walter Hewlett, also an HP board member, seized on in a statement.
"We are confident that if (HP directors) have any conflicts over the merger's defeat they will deal with them in a professional manner," he said. "All members of HP's board will honor their fiduciary duty," Walter Hewlett said.
Both Ginn and Condit argued the merger would work.
"We believe we have the support of most of our 20 largest shareholders," Condit told a conference call, later cautioning, "Our discussions with those shareholders are promising, very positive, but you don't count votes that way. You count votes on proxy cards that have been submitted."
HP management and HP founding family scion Walter Hewlett, who says the merger would devalue HP's printing franchise by taking on the No. 2 personal computer maker, both claim significant support, although the latest significant investor to go public sided with Hewlett against the merger.
CalPERS, the California Public Employees Retirement System said on Friday that it would vote its stake, less than 1 percent of HP stock, against the deal, and a smaller Ontario, Canada pension fund made the same call.
Ginn and Condit in particular argued that big technology mergers could succeed, especially with integration planning, which has been a top issue for board and management.
Analysts shy away from calling the vote on the deal, which HP says would make it into a one-stop technology shopping center for customers.
Ginn said that pension funds and trusts -- such as the HP family and family foundations that plan to vote their 18 percent stake against the merger -- were most interested in preserving capital, not growth, and thus too risk-averse to support the deal.
TO RESIGN OR NOT TO RESIGN
No Hewlett-Packard executive or board member is on record as saying he or she would resign if the merger fails, but merger supporters have said that possibility would disrupt HP's effort to find an alternate strategy if the merger failed.
"That conflict is that they (board members) will be driven by the will of the shareholders in one instance, and their own personal beliefs about what they think is the right strategy on the other side," Ginn said, asked what would happen if shareholders said "no".
Walter Hewlett has argued that the board and senior HP executives would stay on and hammer out a "Plan B".
Shares of HP closed up 1.89 percent at $20.98 and Compaq was off 4.49 percent at $11.27 on the New York Stock Exchange (news - web sites), suggesting waning belief the merger would succeed as Compaq's price fell farther behind the value of HP stock implied by the deal's terms.
HP shares have fallen 10 percent since news of the deal broke on Sept. 3, while International Business Machines Corp. shares are up 5 percent.
Condit and Ginn both said they had not made up their minds, and Ginn said it would be a difficult decision for all.
"What I will do is that if I decide to leave, that I have a proper replacement before I walk out the door," Ginn said.
He also said that the pro-merger members of the board were not personally at odds with Hewlett and could work with him.
"The issue is not Walter. The issue is the recommendation that Walter supports, that is where I think we disagree with Walter," he said. |
