HP/COMPAQ: Campaign for votes enters home stretch

Days ahead of a shareholder vote on Hewlett-Packard's proposed takeover of rival Compaq, the main supporters and opponents of the deal began a last ditch campaign to convince shareholders of the respective advantages and disadvantages of the proposed deal.

Over the weekend HP board member Walter Hewlett, speaking on behalf of the William Hewlett Revocable Trust, said three additional institutional shareholders -- The New York State Teachers Retirement System, the Public Employees' Retirement Association of Colorado and Parnassus Investments -- have announced their intention to vote against the deal.

With the most recent announcements, more than 20 institutional shareholders have voiced opposition to the deal, Hewlett said in a statement, along with more than 55 percent of registered shareholders who had voted against the deal on proxy cards issued by the 'vote no' camp.

Late Sunday, HP issued a statement calling Hewlett's claims "inaccurate." The company took aim at Hewlett's claim that 55 percent of registered shareholders had voted against the deal, arguing that the actual state of affairs was impossible to know because shareholders routinely change their votes by submitting revised proxy instructions to HP.

Both HP and Hewlett have issued proxy cards to shareholders, white cards from HP and green cards from Hewlett, and shareholders can submit any number of cards but, in this case, only voting instructions on the most recently submitted card will be honored.

"Hewlett initiated this proxy contest," said HP in its statement. "Hewlett repeatedly mischaracterizes and exaggerates the cost and expense the company must incur in pursuing this proxy contest."

Earlier Sunday, Palo Alto, California-based HP issued its own statement saying four pension funds -- Florida State Board of Administration, Pennsylvania Public School Employees Retirement System, State Teachers Retirement System of Ohio and the Wisconsin Investment Board -- had announced support for the deal within the preceeding 48 hours.

Additionally, it named 13 other institutional shareholders that it said had announced support for the takeover, either publicly in press releases or through the media, and said this represented about double the number that have said they will oppose the deal.

HP shareholders are due to vote on the proposed takeover on Tuesday. That vote will be followed by another vote on Wednesday by shareholders of Houston-based Compaq. The announcements are the latest in a string of press releases, news conferences, letters to shareholders and newspaper ads that have sought to convince undecided stock owners of the advantages or disadvantages of the proposed deal.

HP says the takeover will create the market leader in servers, storage, management software, printing and imaging, and PCs and lead to annual savings of US$2.5 billion. Hewlett has countered, saying the deal involves significant risk and would see shareholders selling 35 percent of a stake in HP's imaging and printing business in return for a stake in "a much worse business -- PCs and commodity computing."

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