Calpers To Vote Against HP-Compaq Merger

The decision comes days after the deal got a thumbs up from Institutional Shareholder Services, an influential independent investor advisory firm, and looked likely to intensify the bitter battle for the largest merger in computer industry history.

Hewlett-Packard Chief Executive Carly Fiorina has sought to fend off objections to the merger brought by heirs of HP's founding families.

Calpers said it owned 7.6 million HP shares and 6.5 million of Compaq, representing less than 1 percent each of the outstanding shares of the two companies. However, the giant pension fund's moves are closely watched by investors.

"In the final analysis, it is important to state this decision is not a referendum on HP's management team or its CEO Carly Fiorina," Calpers said in a statement. "Rather it is solely based on the merits of this transaction as it relates to Calpers portfolio."

Institutional Shareholder Services, which is expected to sway 10 percent to 12 percent of HP shareholders, on Wednesday had said Compaq shareholders should vote for the deal, in a postscript which had emboldened management to declare that they had seized the momentum in the bitterly contested merger battle.

Hewlett-Packard also cleared the last regulatory hurdle on Wednesday after winning Federal Trade Commission approval for the deal.

Walter Hewlett, a dissident HP board member and son of HP's co-founder, has assembled a roughly 20 percent bloc of votes in his intense battle to defeat the proposed merger.

Hewlett says Compaq would bloat HP's business with its personal computer division, while HP management says Compaq offers services and technology that would make the combined firm a global powerhouse.

Hewlett Packard shareholders are due to vote on the proposed merger on March 19, with Compaq shareholders voting one day later.

Shares of Hewlett-Packard closed up 59 cents, or 3.0 percent, at $20.59 on the New York Stock Exchange on Friday, while shares of Compaq closed up 65 cents, or 5.8 percent, at $11.80.

REUTERS

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