Big Shareholders Divided on HP Deal

Two big Hewlett-Packard Co. shareholders announced opposite conclusions on the merits of the company’s $22-billion acquisition of Compaq Computer Corp. on Wednesday, with HP’s management gaining the most ground.

Putnam Investment Management, which has about 46 million shares, or about 2.4%, said it would vote for the acquisition.

“We believe the merger enhances the combined companies’ strategic and competitive positions and offers financial benefits to shareholders,” Putnam said in a statement.

Earlier in the day, the investment arm of Bank of America added its name and 6.4 million HP shares to the list of those opposed to the deal.

Banc of America Capital Management will vote its shares against the merger because “overall, we think there might be dilution” of HP profits, said spokesman Joe Fazzino.

The bank’s investment arm has about 0.3% of HP’s outstanding shares, bringing the announced opposition close to 25%, including the 18% controlled by heirs of HP founders Bill Hewlett and Dave Packard. Hewlett’s son Walter, an HP director, is leading the proxy fight leading up to the March 19 voting deadline.

The effect of Banc of America’s stand could be greater than reflected by the number of shares it controls directly.

Bank of America customers own an additional 47 million shares, and the bank’s portfolio managers and private bankers will advise clients who ask for guidance about the group’s decision, Fazzino said.

Putnam’s support brought those announced in favor of the merger to about 8%. The firm also controls 69 million shares of Compaq, which Walter Hewlett’s side said could have colored its thinking.

HP shares fell 45 cents to $20.11. Compaq dipped 12 cents to $11, both on the New York Stock Exchange.

For the merger to go through, HP Chief Executive Carly Fiorina needs a majority of the shares that are actually voted by Tuesday. The company can’t vote on behalf of those who don’t turn in proxy cards.

HP employees and retirees also are voting their own shares, including those held in retirement plans, a company spokesman said.

Some 6% of HP shares are held by current or former workers, according to Walter Hewlett’s proxy solicitation firm.