HP heir hints at share sale over Compaq deal
By Scott Morrison in New York
Published: February 28 2002 20:50 | Last Updated: February 28 2002 23:03
Walter Hewlett, the dissident Hewlett-Packard board member, hinted on Thursday he might sell his holdings in the company if the management succeeded in its $22bn bid to acquire Compaq Computer.
Mr Hewlett, son of one of HP's co-founders, said: "I think this is a very bad thing for the company if this thing goes ahead."
He said the Hewlett Foundation, the charitable group set up by his father, which remains one of HP's top share-owners, would probably reconsider its investment strategy if shareholders approved the deal.
Mr Hewlett has argued that negative market reaction to a deal suggested that approval by shareholders would result in an immediate $5 drop in the net value of HP shares. Mr Hewlett said: "If it goes down $5, the foundation suddenly has $550m less of an endowment and stock in a troubled company."
That would amount to a material change that would prompt the Hewlett Foundation to "revisit" its investment strategy. The foundation holds 1.9 per cent of HP's outstanding shares, but it will, over time, receive an additional 3.7 per cent of HP shares from a trust fund co-chaired by Mr Hewlett. The combined holdings equal 4.6 per cent of HP's total shares, the second largest block of HP shares.
The foundation is in the middle of a diversification programme to reduce its HP shareholding. The foundation, which has about 35 per cent of its assets in HP shares, is aiming to reduce that to 10-15 per cent within three to four years. Mr Hewlett's comments suggested the foundation, of which he is chairman, might speed up its diversification plan.
The Packard Foundation, with 10.4 per cent, is HP's largest shareholder and joined with the Hewlett Foundation last year in opposing the deal. The two organisations together form the core of a voter block with at least 18 per cent of HP shares aligned against the deal.
An adviser to Mr Hewlett said a "yes" vote by shareholders would force the HP heir to reconsider his own stake in the company, which is less than 1 per cent. "It's a purely financial decision. You would have to make an investment decision, the same as any other portfolio manager with a big position in a bad thing."
HP said: "The Hewlett Foundation has different investment priorities from most shareholders. It has a short-term diversion focus, so this is not surprising."
The outcome of the proxy battle could become clearer next week when Institutional Shareholder Services, the proxy advisory firm, will make a recommendation.
Observers have said an ISS recommendation against the merger would all but doom it, while an ISS nod in favour would provide HP with critical momentum leading up to the March 19 shareholder vote. It has been estimated that HP would need the support of two-thirds of institutional shareholders to overcome opposition from the Hewlett and Packard foundations. |
