Calpers is not among HP’s largest institutional investors; it owns 7.6 million HP shares – a 0.39% stake in the company – making it HP’s 30th largest shareholder. However, it has a reputation for rigorous analysis of its investments, so its opposition to the deal is expected to have a strong influence on the way that other shareholders cast their votes.
The pension fund cites “significant integration risks” and the likely “negative financial consequences of the merger” in making its decision. It also feels that HP is paying too high a premium for Compaq, but emphasised that the decision is based simply on the best interests of its investment portfolio and does not constitute “a referendum on HP’s management team or its CEO Carly Fiorina”.
“We decided it was better to hold shares of both HP and Compaq,” Calpers spokeswoman Pat Macht told the Wall Street Journal. “When you compare it to the risks of the deal, it is better for us to stay where we are.” Macht added that Calpers will also vote the 6.5 million shares it holds in Compaq against the transaction.
According to an HP spokesperson, HP is “disappointed” with Calpers’ decision, but remains upbeat about its prospects of pushing the deal through. “Calpers is only one share owner and we believe that the good judgement of the rest of our shareowners will prevail, and the merger will be approved.”