COMPANIES & FINANCE THE AMERICAS: HP sees up to Dollars 1.4bn charge for Compaq ACQUISITIONS MOST OF THE SPECIAL CHARGES ON HP's PROPOSED Dollars 22bn PURCHASE WOULD BE BOOKED THIS FISCAL YEAR:
Financial Times; Feb 28, 2002
By SCOTT MORRISON and ELIZABETH WINE
Hewlett-Packard said yesterday it would take as much as Dollars 1.4bn in special charges if it completes its proposed Dollars 22bn acquisition of Compaq Computer.
The preliminary estimate was provided by Bob Wayman, HP chief financial officer, at a meeting with securities analysts. He said the group's forecast included an estimated Dollars 450m-Dollars 700m in restructuring charges and an additional Dollars 450m-Dollars 700m in purchase accounting and goodwill costs. The company estimated the cash impact of the charges at Dollars 800m to Dollars 1.2bn.
The company's estimates were far below those provided by advisers to Walter Hewlett, the dissident board member who is spearheading opposition to the transaction. The Hewlett camp had said that HP could incur restructuring charges of Dollars 1.9bn-Dollars 2.9bn as a result of the merger, an amount that HP had strongly disputed.
Mr Wayman said the high-end of his estimate range was "quite conservative". He said the actual costs would probably be near the low-end of his estimate range, but that it was still too early to be more specific.
Most of the restructuring charges would be booked in fiscal 2002, which ends in October.
HP's meeting was the company's final opportunity to pitch its controversial deal to the entire Wall Street community.
Carly Fiorina, the chief executive, began by arguing that the merger would strengthen the company's ability to provide end-to-end products and services in an increasingly competitive cost environment.
HP reiterated that the group's targeted Dollars 2.5bn in cost savings was a "high confidence" estimate and suggested it could be higher if, for example, it achieved greater procurement synergies and eliminated more duplication among the two companies.
One fund manager told the Financial Times that in a private meeting Ms Fiorina said HP was targeting Dollars 3bn in synergies, even though the company's official estimate remained Dollars 2.5bn.
Mr Wayman also said the US Federal Trade Commission was "getting close" to its final deliberation on the merger but refused to comment further. He defended the company's latest quarterly results, which surpassed expectations that had only one week before been raised by the company. That prompted some analysts to question whether HP had tweaked the results just before the March 19 shareholder vote, a charge HP has strongly denied.
HP reiterated its estimate that earnings for its 2003 fiscal year for the combined companies would be Dollars 1.51 per share, 12 per cent above the current analysts' estimate for its stand-alone earnings of Dollars 1.35 per share.
The Dollars 1.51 estimate is based on analysts' consensus earnings forecast for Compaq's calendar 2003 year of 49 cents a share, adjusted to HP's October fiscal year-end. It does not include restructuring charges and non-cash charges associated with acquisitions. Additional reporting by Elizabeth Wine
Copyright: The Financial Times Limited 1995-2002 |
