Fund Plans to Vote Against HP Merger

Ontario Teachers’ Pension Plan said it will vote its Hewlett-Packard Co. shares against the computer maker’s proposed $22-billion acquisition of Compaq Computer Corp. because it believes the union would hurt shareholder value.

The proposed transaction lacks merit and would increase HP’s exposure to a “troubled PC hardware business,” the fund, which owns 1.46 million HP shares, said in a statement Sunday. The agreement would dilute investors’ stake in the company’s profitable imaging and printing business significantly, said the Toronto-based pension plan.

“How many of these mega-mergers have really added value for the shareholders?” fund Chief Executive Claude Lamoureux said. “All the studies that one can see on this topic show that easily 60%, 70% or 80% of these mergers don’t produce the kinds of benefits expected.”

The fund joins other major shareholders that have said they will vote against the purchase. These include the California Public Employees’ Retirement System, which disclosed its intention Friday, and members of HP’s founding families, including board member Walter Hewlett, who is leading a proxy fight against the acquisition. The heirs own 18% of the company’s shares. A shareholder vote is set for March 19.

The pension fund has about $44.1 billion in assets. Its stake equals 0.08% of HP’s shares outstanding and represents 0.07% of the fund’s holdings.

“We’re disappointed, but we believe that the good judgment of the rest of our shareowners will prevail, and the merger will be approved,” said Rebeca Robboy, an HP spokeswoman. “The merger will enable us to invest in multibillion-dollar growth opportunities such as digital imaging and digital publishing.”

HP Chief Executive Carly Fiorina has said the company has enough shareholder backing to complete the purchase, which she says will improve sales of server computers and services.

Institutional Shareholder Services, a proxy advisor, said last week it advised clients, which control 20% of HP, to vote for the deal.

Shares of Palo Alto-based HP rose 59 cents to $20.59 on Friday on the New York Stock Exchange. Compaq rose 65 cents to $11.80, also on the NYSE.