From The Financial Times:
Coming out of the closet
Institutional investors in Hewlett-Packard have it tough enough trying to decide whether to approve HP's controversial merger with fellow computer-maker Compaq.
But now, in the run-up to the March 19 proxy vote, the two companies are leaning on some of them to support the deal - and do it publicly.
This is not likely to sit well with portfolio managers, a class of people used to staying tight-lipped about stocks they own in times of controversy.
Led by HP chief Carly Fiorina, the companies have been on a roadshow, visiting large HP shareholders to persuade them to back the deal. Their support is critical, because the heirs of founders Bill Hewlett and Dave Packard have announced they will vote their 18 per cent of HP shares against the merger.
Thus far, just one large shareholder has voiced support for the deal. And some industry watchers are suspicious that the shareholder, Alliance Capital, might well have done so last month simply to detract attention from its own high-profile woes.
Alliance has come under fire as the largest owner of doomed Enron shares (it also shared a director with the bankrupt energy trader). Alliance is also a big holder of Tyco, the large conglomerate whose share price has suffered greatly from Enronitis.
Aside from Alliance, vocal support from shareholders for the HP-Compaq merger has been non-existent. Nonetheless, HP has repeatedly told reporters "lots of big investors like this deal". When asked for names of the enthusiastic supporters, HP has been unable to comply.
Compaq is trying to help. Chief executive Michael Capellas last month said Putnam Investments - one of the top five mutual fund companies, Compaq's largest shareholder and one of the largest HP owners - supported the deal. The "outing" backfired when Putnam, asked for confirmation, declined to comment.
HP, undeterred, has continued, pushing at least one large shareholder to praise the deal to the press. That too, appears to have rebounded against the company. "It's not my job to make your life easier," the HP shareholder told management recently. "My job is to act in the best interests of my investors."
The pressure is not just coming from one side.
Walter Hewlett, the HP heir who has mounted an aggressive campaign against the deal, employs e-mails and faxes to get his message across - lots of them.
Fund managers report being buried under a blizzard of missives from the man they now refer to simply as "Walter."
In the past week or so, investors on Walter's massive mailing list received sometimes as many as two or three communications a day. The faxes came frequently too: one harried stockpicker was sure the frequency had hit one every 10 minutes.
"This is getting ridiculous," grumbled another.
According to one cynic, sheer exhaustion on the part of the hapless shareholders may in the end decide the fate of the technology mega-merger: "I think there's a chance, if you have enough people who are sick of dealing with these two pathetic companies and just don't want to take an activist role, they might just say 'fine, consolidate with Compaq, and good luck to you'." |
