Fate of HP-Compaq deal hinges on two institutions
By Scott Morrison and Louise Kehoe in San Francisco and Robert Clow in New York
Published: March 17 2002 22:22 | Last Updated: March 18 2002 03:15
The fate of Hewlett-Packard's $20.5bn (£14.4bn) bid for Compaq Computer could hinge on the two largest HP shareholders that have not yet publicly indicated whether they support the deal.
With Tuesday's voting deadline for HP shareholders approaching, all eyes were focused on Capital Research & Management and State Street Global Advisors, which jointly hold about 5.9 per cent of HP, some 114m shares. The victory margin in the biggest computer merger ever attempted is expected to be within a few percentage points - so these two institutions could determine the outcome of the bruising five-month proxy battle with dissident director Walter Hewlett.
It was not clear whether the two institutions had reached a decision over the weekend. However, by Sunday night HP believed State Street had thrown its support behind the company, according to people close to it. However, HP refused to confirm the State Street support. In an interview with the Financial Times on Friday Michael Capellas, Compaq's chief executive, acknowledged there was some doubt about how "two or three" major shareholders would vote.
"Are there enough undecided that it could go one way or another? Yes, there are some undecided votes," he said, while maintaining that he was confident the deal would be approved.
One HP director said last week that he believed it had the support of most of its 20 largest shareholders. But Mr Hewlett has also claimed significant support among top shareholders.
The Hewlett and Packard families have pledged their combined 18 per cent against the deal.
Analysts say the outcome remains too close to call and sources suggested that neither side had a sizeable lead among retail shareholders - who hold 25 per cent of HP stock.
It has been widely estimated that in order to win, HP needs support from about two-thirds of the institutional shareholder base, which accounts for 57 per cent of the company's stock.
Of particular concern to HP are the 20 largest shareholders, which control about 30 per cent of the company's stock.
Of these, Barclays Global Investors, Alliance Capital and Putnam Investments have pledged their combined 6.9 per cent in favour of the deal.
Bank of America and Brandes, with a combined 1.6 per cent, said they would vote against it.
HP got a boost two weeks ago when ISS, the proxy advisory group, recommended shareholders support the deal.
But almost a dozen mid-sized ones have since announced their opposition.
"We're winning the elephants, but we are getting eaten alive by the fleas," someone close to the deal said late last week.
However, an extensive survey by one financial institution recently concluded that HP investors would approve the deal by a 55 per cent to 45 per cent margin. The study also concluded that Capital Research and State Street were inclined to back the merger.
State Street said on Friday it would vote the vast majority of shares under its control, while Capital Research portfolio managers were expected to vote individually, rather than as a block. The survey estimated that 80 per cent would be cast in favour.
Compaq investors are widely expected to approve the deal on Wednesday. |
