CalPERS Says It Will Vote Against HP-Compaq Merger
In a potential setback to Hewlett-Packard Co.’s bid to merge with Compaq Computer Co., the California Public Employees’ Retirement System on Friday said it will vote against the combination when it comes up for shareholder approval March 19.
CalPERS, which owns 7.6 million shares of HP and 6.5 million shares of Compaq, said a merger would distract HP from its core business. In a statement released on its Web site, it also cited the “high premium being paid, the negative financial consequences of the merger and significant integration risks and opportunity costs related to losing focus on HP’s core strengths.”
“Basically, we’d rather be safe than sorry,” said Pat Macht, a spokeswoman for the Sacramento-based pension fund that manages $152 billion in retirement money for 1.2 million members. “It’s a high premium, unprecedented in the tech industry. And if the merger goes through, there’s no question that there will be great costs as competitors try to take market share, which will be distracting from their integration.”
Although CalPERS’ stake is not significant compared with that of other major investors, many look to the fund for guidance. The CalPERS announcement comes days after HP snagged support from Institutional Shareholder Services, an advisor to large investors. ISS clients hold 23% of HP’s shares.
The hotly contested merger, championed by HP Chief Executive Carly Fiorina, has divided shareholders. Since the merger was announced in December, Walter Hewlett and David Packard--sons of HP founders--have lobbied against it, saying it would further enmesh the company in the troubled PC market.
CalPERS, in its statement, was careful to distinguish its opinion of the merger from its opinion of Fiorina, who has staked her career at HP on the deal.
“It’s important to state that this decision is not a referendum on HP’s management team or its CEO, Carly Fiorina,” the statement said. “Rather it’s solely based on the merits of this transaction as it relates to CalPERS’ portfolio.”
Shares of Palo Alto-based HP gained 59 cents Friday to $20.59, and Houston-based Compaq’s stock rose 65 cents to $11.80, on the New York Stock Exchange.
