Putnam Investments To Vote For HP-Compaq Merger

Boston-based Putnam, the nation's No. 4 fund group, is now one of the most high profile investors to side with HP in its plans to push through the $22 billion deal that could become the biggest merger in computer industry history.

Putnam's move however comes as no surprise in the high-stakes proxy fight because Compaq's chief executive already said the fund firm would approve the deal. Also a senior HP official said major shareholders were backing it.

The fund firm is the largest single shareholder of Compaq and the eighth largest shareholder of HP and said in a statement "We believe the merger enhances the combined companies' strategic and competitive positions and offers financial benefits to shareholders."

A unit of Marsh and McClennan Cos Putnam owns 3.99 percent of Compaq's shares and 2.5 percent of HP's shares. Putnam was not immediately available to say how many of those shares may be voted for the proposed deal.

Putnam's decision may give the HP team new hope because until now most big-name investors have come out against the deal. Still analysts say it is a toss-up which side will win at the March 19 shareholder meeting.

On Wednesday Banc of America Capital Management, HP's fifth biggest shareholder, said it would vote about 6 million of the some 54 million HP shares it owns against HP because the linkup would dilute the combined company's earnings and rely too much on the sale of personal computers.

Last week, the California Public Employees Retirement System, the nation's biggest pension fund, said it would vote "no" in part because of the high premium being paid for Compaq and the risk that competitors would eat into market share while the two rivals combine.

Brandes Investment Partners and Wells Fargo and , also have also joined forces with dissident HP board member Walter Hewlett, son of Bill Hewlett, one of the founders, to scuttle the deal.

However not everyone opposes the plan. Last week Institutional Shareholder Services, which independently advises big investors, threw its support behind the bitterly contested merger proposal.

Compaq Chief Executive Michael Capellas said in January Putnam was lining up behind the merger. And earlier this week HP board member Phil Condit said most top shareholders were behind the merger plan.

But Walter Hewlett said on Tuesday that most were on his side.

With only a week to go before the voting, shares of HP closed down 2.19 percent at $20.11 and Compaq was off 1.08 percent at $11.00 on the New York Stock Exchange on Wednesday.

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