21 January 2002 In the latest twist to one of the most tumultuous merger deals in recent years, Alliance Capital Management, owner of just over 1% of Hewlett-Packard (HP) stock, has announced its support for the company’s acquisition of rival Compaq.
In giving its approval to the deal, the mutual-fund manager has become the first major institutional investor to publicly back the acquisition. Alliance also owns about eight million Compaq shares.
The deal makes sense, according to the mutual-fund manager, because it is the only way that the two companies will be able to survive the continuing consolidation in the PC, server and storage markets.
The news will come as a relief for HP CEO Carly Fiorina, who has come under fire from a number of die-hard opponents of the deal. Most notably from dissident director Walter Hewlett, the son of HP founder Bill Hewlett.
However, HP management still needs to win over 61% of the support of other shareholders to gain majority approval as a result of opposition from the families of both founders. Together, they control about 18% of HP’s stock and are against the deal because they believe it will weaken the company’s franchise and dilute HP’s earnings.
A shareholder vote is now scheduled for June 2002, following the European competition regulator’s decision to conduct a further four-month review of the transaction.