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Board Disputes Hewlett's Claims

Hewlett Packard's board of directors denied Monday that it pressured Walter Hewlett to vote for its $24.6 billion bid for Compaq Computer at a meeting in September 2001. Hewlett, who is now fighting the merger, recently said that he privately opposed the deal from the start, and voted for the tie-up only because HP would have been forced to pay a higher price if the board's decision had been anything other than unanimous.

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Hewlett Packard Corp.’s board of directors denied Monday that it pressured Walter Hewlett to vote for its $24.6 billion bid for Compaq Computer Corp. at a meeting in September. Hewlett, an HP director and son of HP co-founder William Hewlett, joined HP’s eight other directors in supporting the merger at a meeting Labor Day weekend, only to announce in early November that he would vote against the merger if it is put before shareholders for approval. Since then, Hewlett has waged an aggressive campaign to defeat the deal. It is unusual for a company director to change his mind about a merger, but Hewlett has said recently that he privately opposed the deal from the start. Hewlett voted for the tie-up only because HP would have been forced to pay a higher price if the board’s decision were anything other than unanimous, he said in a recent Securities and Exchange Commission filing. And that would have made a bad deal even worse, he maintained. But HP’s other eight directors deny that version of the events. In a letter sent Monday to Hewlett and filed with the SEC, HP’s directors said no one ever suggested the price for Compaq would rise if Hewlett voted against the deal. In fact, they said, Hewlett missed key meetings in which such financial details were discussed, and he did not tell the board he planned to vote his shares against the merger until a half hour before making his public announcement. A spokesman for Hewlett declined to comment. Hewlett has also failed to lay out an alternative strategy, the board’s letter said. Supporters of the deal say the transaction is critical to HP’s efforts to diversify into computer services, but Hewlett has argued the deal leaves HP overexposed to the weak personal computer market. Houston-based Compaq and Palo Alto, Calif.-based HP are the world’s second- and third-largest computer makers, respectively. Late last year, Hewlett was joined in his campaign against the merger by several descendants of David Packard, HP’s other co-founder. Together the two families control about 18 percent of HP’s outstanding stock. A shareholder vote is expected in late February at the earliest. Copyright (c)2002 TDD, LLC. All rights reserved.

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