Banc of America Securities doubts HP-Compaq merger will pass in note 3/5/02
03/05/02 10:06 AM
Source: Banc of America Securities
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Hewlett-Packard Company
(HWP) - Market Performer
Joel Wagonfeld
ISS Preview and Comprehensive Analysis of the Merger Vote
* ISS issues its merger recommendation today after the close. Institutional Shareholder Services (ISS), a third-party proxy consultant, is scheduled to release its widely anticipated recommendation regarding the HP/Compaq (CPQ–$10.38–Buy) merger today.
* The ISS opinion may have a largely psychological impact. ISS has roughly 23% of HP shareholders as clients, and its opinion will be widely watched due to its independent nature. However, we note that not all ISS clients will rely on the opinion to the same degree, as ISS analysts typically do not evaluate hostile mergers of complex technology companies.
* We have performed a variety of voting analyses. Attached are several scenarios based on different assumptions about the outcome of the ISS opinion as well as other potential factors affecting the vote.
* We think odds remain against the deal, however ISS decides. An ISS opinion of “NO” would provide justification for any shareholders who may otherwise be reluctant to vote against HP’s management. If the ISS opinion is “YES”, we do not think it would necessarily imply the deal’s success, as over 66% of institutions would still need to vote “YES” for it to pass, according to our analysis.
* We think uncertainty clouds potential value in HP shares. HWP is trading at only 13x our CY03 estimate and near its 10-year lows on P/S and P/B. However, we remain cautious on the shares because of continued uncertainty related to either outcome.
This report is issued in the U.S. by Banc of America Securities LLC, member NYSE, NASD and SIPC; in Europe by Banc of America Securities Limited; and in Asia by BA Asia Limited (referred to herein, collectively as “Banc of America Securities”).
This report has been prepared by Banc of America Securities as part of its research activity and not in connection with any proposed offering of securities or as agent of the issuer of any securities. This report has been prepared independently of any issuer of securities mentioned herein. Neither Banc of America Securities nor its analysts have any authority whatsoever to make any representation or warranty on behalf of the issuer(s). This report is provided for information purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument. Any decision to purchase or subscribe for securities in any offering must be based solely on the information in the prospectus or other offering document issued in connection with such offering, and not on this report.
The information contained in this report has been obtained from sources believed to be reliable and its accuracy and completeness is not guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein, and Banc of America Securities has no obligation to update or correct any information herein. The views and other information provided are subject to change without notice. Any opinions, projections or forecasts in this report are, unless otherwise stated, those of the author and do not represent the views of the issuer or any other person. This report does not constitute or contain investment advice. This report is issued without regard to the specific investment objectives, financial situation or particular needs of any specific recipient. |
