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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Night Writer who wrote (93608)	11/6/2001 4:28:01 PM
From: Elwood P. Dowd	Respond to of 97611

Arbs Wonder Where Packards Will Side by: skeptically 11/06/01 04:20 pm Msg: 260195 of 260197 Spread On H-P-Compaq Balloons On News Family Opposed 11/06 2:23 PM (DJ) Story 7111 =DJ Spread/H-P-Compaq-2:Arbs Wonder Where Packards Will Side The family of H-P's late co-founder William Hewlett, along with a foundation in the family's name, said Tuesday it will vote its stake of the company against the proposed acquisition of Compaq. Walter Hewlett, an H-P director, said in a statement that he believes H-P "can create greater value for stockholders as a stand-alone company than as a company combined with Compaq." The decision came as a surprise to arbitrageurs and other market watchers, who noted that the board had voted unanimously in favor of the deal. "We were stunned," said an arbitrageur in New York. "It's not a corner from which we expected something like this to arise. Very few board members are willing to take steps like this. And to have the Hewlett name attached to it just makes it that much worse." The big question mark now is whether the Packard family, which holds a roughly 10% stake in the company, will join ranks with the Hewletts in opposing the deal. Story 7494 =DJ Spread/H-P-Compaq-3:William Hewlett Has Team Of Advisers H-P's planned acquisition of Compaq has been frowned on by many investors and market observers since it was announced in early September. Doubts about the deal's merits grew even deeper after Compaq reported dismal earnings last month. Even so, many arbitrageurs, also known as takeover traders, and other investors were betting that the deal would close eventually. Arbitrageurs - who typically bet on pending deals by selling short shares of the acquirer and buying shares of the target - along with other investors had built up a hefty short position in Hewlett-Packard. "There's maybe 25 million to 30 million shares of short interest (in H-P) from the preannouncement (of the merger) level," said an arbitrage analyst. Tuesday's news triggered a scramble to unwind some of those bets amid fears that deal, already a tough sell, now stands a much stronger chance of unraveling. Those fears prompted the deal's spread to widen to as much as $4.50. Under the terms of the deal, H-P is offering 0.6325 of its shares for each share of Compaq. At H-P's current share price of $19.40, down 14.86%, the value of its offer is $12.27 a share. That puts Compaq, currently at $8.20, down 8.79%, at a whopping $4.07, or 33%, discount to H-P's offer. Though the Hewlett family stake represents only 5%, arbitrageurs are concerned about the possible influence the family will have on other investors. They note that Hewlett has hired Cooley Godward LLP for legal counsel, Friedman Fleischer & Lowe LLC as financial adviser and public relations firm Joele Frank Wilkinson Brimmer Katcher. "He's gearing up to get this vote," said an arbitrageur. For its part, Hewlett-Packard and its board said they were not surprised by the Hewlett family's decision. H-P said it remain fully committed to the merger and expects shareholder approval. -By Janet Whitman, Dow Jones Newswires; 201 -938 -5248; janet.whitman@dowjones.com (END) DOW JONES NEWS 11 -06 -01 04:05 PM