Hewlett family to vote against Compaq merger

The children of Hewlett-Packard's co-founder, William Hewlett, have announced that they would contest the merger if a vote were...

The children of Hewlett-Packard's co-founder, William Hewlett, have announced that they would contest the merger if a vote were put before stockholders.

Walter Hewlett, Eleanor Hewlett Gimon, Mary Hewlett Jaffe, the William R Hewlett Revocable Trust and the William and Flora Hewlett Foundation would all vote against the merger, Walter Hewlett announced in a statement.

The Hewlett family controls about 5% of the company's stock.

HP announced in September that it intended to acquire rival Compaq in a stock swap that was valued at an estimated $25bn (£17bn) based on the companies' share prices at the time. The deal is expected to close in the first half of 2002, following regulatory approval.

"I believe that Hewlett-Packard can create greater value for stockholders as a stand-alone company than as a company combined with Compaq," Hewlett said. He added that HP's printer business and its strong foundation for expanding the company's outsourcing and consulting services business were two of the main reasons to keep the companies from merging.

"Given the lack of stockholder benefits, I believe the extensive integration risks associated with this transaction are not worth taking," Hewlett said.

Hewlett claimed that two negative effects of the merger for HP would be increased exposure to the PC market, an area that he said is neither growing nor profitable; and increased exposure to the lower-end server business, which has historically been less profitable than the high-end server business.

Hewlett also said the merger would distract HP management and employees from areas which the company should be expanding and could also cause customers to delay product orders and purchases, which could have a long-term negative effect on the company's revenue.

Since the announcement, Hewlett claimed that Compaq's business outlook has declined dramatically, making the prospect of benefits from the merger even less likely.

HP issued a statement in response to Hewlett's comments, in which the company said it regretted the family's decision. The board of directors of both companies remain committed to the merger and expect shareholder approval, the statement said.

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