Hewlett prepares for proxy fight over HP/Compaq merger

Stoking the flames in a mounting shareholders' battle to stop the proposed merger of Hewlett-Packard Co. and Compaq Computer Corp., Walter B. Hewlett filed papers with the U.S. Securities and Exchange Commission (SEC) today highlighting the poor financial performance of the two companies since the merger was announced.

In the three months following Aug. 31, the last trading day prior to the merger announcement, Compaq's share price has declined 17.8%, from $12.35 to $10.15 per share, and HP has seen its stock price fall 5.3%, from $23.21 to $21.99 per share, according to the filing. The combined market value of the companies has been slashed by $6.2 billion.

Meanwhile, analyst-consensus estimates for earnings per share at both companies for the 2002 and 2003 fiscal years have declined significantly, Hewlett noted in the filing. Analysts lowered their earnings per share estimates for Compaq by 77.3% for fiscal 2002 and by 60.2% for fiscal 2003, compared with forecasts prior to Aug. 31. For HP, analysts lowered estimates 17.1% for fiscal 2002 and 20% for fiscal 2003.

Hewlett, son of HP co-founder William Hewlett, is a board member at HP and has opposed the planned merger, once valued at nearly $25 billion (see story). He hired proxy solicitation advisers MacKenzie Partners Inc. last month to aid in his opposition.

"Mr. Hewlett has been making his case to a number of Hewlett-Packard shareholders that the merger does not make sense," said Charlie Koons, an assistant vice president at MacKenzie Partners in New York. "At this point, it's just preliminary."

The proxy statement's filing date hinges on when HP is going to hold its annual shareholders meeting. The meeting is likely to be at the end of February, Koons said.

Walter B. Hewlett, along with his two siblings, Eleanor Hewlett Gimon and Mary Hewlett Jaffe, and The William R. Hewlett Revocable Trust, oppose the merger. So does David Packard Jr., the son of HP co-founder David Packard. Walter B. Hewlett is the only party named in the latest SEC filings.

Copyright © 2001 IDG Communications, Inc.

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