Packard joins HP-Compaq family feud
Published: 07 Nov 2001 16:03 GMT
Opposition to Hewlett-Packard's bid to buy Compaq Computer has gained ground as David Packard, son of the HP co-founder, said that he would back the Hewlett family's decision to oppose the acquisition.
The moves deliver a significant blow to the planned $21.55bn acquisition, announced in early September. Analysts say the deal now has a 50-50 chance of falling through.
On Tuesday, the Hewlett family, which owns 8 percent of HP, announced its opposition to the merger. Packard said in a statement, also issued on Tuesday, that he personally agrees with the Hewlett family's decision.
"The merger comes down to one question -- which way does the David and Lucille Packard Foundation vote?" said Lehman Brothers analyst Dan Niles.
As family opposition to the deal gains momentum, HP's board of directors -- with the exception of Walter Hewlett -- reaffirmed on Wednesday that it stands firmly behind the deal to acquire Compaq.
"The board thoroughly analysed this transaction and unanimously concluded this is the very best way to deliver the value our shareowners expect," Dick Hackborn, former chairman of HP, said in a statement. "Today, I'm even more convinced of the power of this combination, particularly given the progress of our integration plans."
David Packard is not part of the Packard Foundation, which owns 10.3 percent of HP's shares and could vote either way. He did say that the foundation is extremely unlikely to support the merger, however.
"For some time I have been skeptical about management's confidence that it can aggressively reinvent HP culture overnight," Packard said in the statement, which Niles obtained and made available in a report.
He also criticised the logic of the merger plan for depending on massive employee layoffs of at least 15,000 -- probably more -- which, he said, went against HP's corporate tradition. "For over fifty years, one of HP's fundamental corporate objectives has been to provide long-term employment for its people," he said.
Although analysts say the deal is likely to unravel, they have also suggested it could proceed with a different structure. "It is also possible for HP to change the structure of the deal, e.g., to include some kind of spinoff of the PC biz before the shareholder vote," Niles said.
The possibility of the deal's collapse drove HP shares down 17 cents to $19.64 in premarket trading. Compaq shares sunk 43 cents, or 5 percent, to $8.07.
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