March 11, 2002 03:06
San Jose Mercury News, Calif., Hewlett-Packard Column
By Tracy Seipel, San Jose Mercury News, Calif.
Mar. 11--Pencil or pen?
A recent newspaper advertisement from Compaq Computer shows a voter marking the "FOR" box in favor of the Hewlett-Packard merger with a pencil.
But HP's white proxy card specifically asks voters to mark the box "using dark ink only." Does it matter?
According to Innisfree M&A -- the folks sending out HP's white proxy cards -- it doesn't. "It's easier to scan ink," said Innisfree co-chairman Alan Miller. But whatever writing implement is used -- pen, pencil, crayon, finger-paint -- the vote is valid.
But, we worried, couldn't a pencil vote be erased and changed? "I'm not erasing -- but I can't speak for the other side," quipped Miller.
Dissident director Walter Hewlett's green card doesn't specify what to use to mark a no vote, but his proxy solicitor, MacKenzie Partners, says fraud isn't likely to be a problem. "It's pretty honest," said MacKenzie President Dan Burch.
Compaq shareholders even have a high-tech choice: They can vote on the Web.
A reminder to HP shareholders: If you sign your card but forget to mark a vote, you are automatically voted in favor of the color of the last card you signed.
Proxy fight, part two: Just when you thought this never-ending election campaign would finally be over March 19, along comes more angst from HP: another vote later this spring, this time to elect new board members and conduct other regular corporate business.
The big question: What happens to Walter? Does he stay or does he go?
Hewlett's fellow board members have made it resoundingly clear they think he's not a team player and doesn't have a clue about how to run a big computer company like HP.
But after his 15 years of service, do they dare kick him off the board? A Hewlett spokesman said the son of HP co-founder Bill Hewlett "intends to continue to make contributions to the company and look out for shareholders' best interests," no matter what happens in the merger vote. "He feels that dissenting is not disloyalty."
But it might not be up to him. After the merger vote, the board of whatever company is left will nominate a new slate of directors. One catch: to participate in that election, shareholders must buy their shares by the close of trading Wednesday, well before they know the outcome of the HP-Compaq vote.
Institutional Shareholder Services endorsed the merger last week, but told HP's board that they should renominate Hewlett or another member of the Hewlett or Packard families as an outside watchdog.
ISS even hinted the families should leverage their 18 percent stake to force one of their candidates to be elected. (Imagine HP Chief Executive Carly Fiorina begging the Hewlett and Packard Foundations to pick anyone but Walter.)
An HP spokeswoman declined to comment on the board's plans for Hewlett, although we'd guess it doesn't include inviting him over for cocktails anytime soon.
on Broadway: Not satisfied with last week's big fat kiss -- er, merger endorsement -- from ISS, which advises big institutions on how to vote, HP is now courting the little people.
Also known as "individual investors," these folks own 25 percent of HP's stock, compared to the money managers, who control 57 percent of HP stock.
Because the moms and pops could make or break them, Fiorina and the rest of HP's board are spending millions of shareholder dollars to get their attention.
Take the two mammoth pro-merger HP billboards that went up this week in New York City's Times Square, rumored to cost more than $300,000 a month.
And don't forget those one- and two-page newspaper ads that HP has been running in a handful of newspapers for several months now.
It's not just the Mercury News, Wall Street Journal, New York Times, Los Angeles Times and San Francisco Chronicle anymore. Now, HP ads are running in the big dailies in Chicago, Boston, Philadelphia, Dallas, Fort Worth, Houston, Detroit, Miami and Tampa.
Industry experts say to run a one-page ad in all those papers for a single day could be costing HP as much as half a million dollars. (Expect next quarter's earnings to be a little light.)
Hewlett's people aren't shelling out as much cash on ads, but they are continuing to send out letters to shareholders outlining -- and re-outlining -- their financial arguments against the deal.
Tally that deal!: Readers everywhere may be confused by how often the price of the proposed merger between HP and Compaq changes from day to day in news reports.
On Sept. 3, the day it was announced, the deal was worth $25 billion. It's since dropped as low as $16 billion, moved back up to $25 billion, then down to $22 billion on Friday.
What gives? Under the merger agreement, HP will pay 0.6325 HP shares for each share of Compaq. So as HP's stock price changes, so does the amount it will pay for Compaq.
There are about 1.7 billion shares of Compaq outstanding. To get the deal's value, multiply the current HP stock price by 1.075 billion. And for God's sake, use a calculator.
Compiled by Mercury News Staff Writer Tracy Seipel. Contact her at tseipel@sjmercury.com or (408) 920-5343.
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