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The California Public Employees' Retirement System (CalPERS) said it decided to oppose the deal because of integration risks, strategic uncertainty and the high premium HP intends to pay for Compaq. The fund felt that owning shares in a combined company would be less advantageous for CalPERS' portfolio than continuing to own shares in the two independent companies.
CalPERS owns 7.66 million shares of HP, less than half a percent of HP's outstanding shares. The fund also owns 6.63 million shares of Compaq, which it intends to vote against the merger as well.
CalPERS' decision differs from the recommendation of Institutional Shareholder Services, an advisory service to which it subscribes. As one of the few institutional investors that regularly announces its voting intentions on shareholder matters, CalPERS is often viewed as a bellwether on contested issues.
The Ontario Teacher's Pension Plan Board (OTPPB), which owns 1.46 million shares in HP, also plans to vote against the merger.
In the opinion of OTPPB, the proposed merger lacks "lacks strategic merit and increases Hewlett-Packard's exposure to a troubled commodity PC hardware business". The fund also echoed the views of leading merger opponent, Walter Hewlett, saying that the merger could dilute HP's strong imaging and printing business.
HP shareholders' votes on the acquisition will be announced on 19 March during a special shareholder meeting..