HP-Compaq gets some support

January 21, 2002 Posted: 1324 GMT

NEW YORK (CNN/Money) -- Hewlett-Packard Co.'s proposed $25.8 billion acquisition of Compaq Computer received some much needed support from a big mutual fund investor, according to a published report Monday.

Alliance Capital Management Holding LP, the 12th-largest institutional investor in Hewlett-Packard with 21.3 million shares, or slightly more than 1 percent of the company as of Sept. 30, endorsed the merger, saying the combined company will have a better chance of surviving the continuing consolidation in the computer industry, the Wall Street Journal reported.

"If the vote were tomorrow, we'd vote in favor of it," Alliance Vice Chairman Lewis Sanders told the paper. The merged company "has a greater possibility of accomplishing this goal than either company alone."

Alliance Capital owns about 8 million shares of Compaq as well, according to the Journal. A spokesman for the firm was unavailable for comment Monday.

The fund's support comes as Hewlett-Packard management tries to win shareholder approval over the objections of the Hewlett and Packard families, which control about 18 percent of H-P shares. The company needs the approval of 61 percent of the remaining shareholders to complete the transaction.

Another fund manager backed the deal last week, calling it "a well-conceived merger," but the manager declined to be identified because it rarely discloses its holdings in individual stocks, the paper reported.

In the latest salvo to convince shareholders, Hewlett-Packard sent a letter to its 750,000 shareholders, saying the combined company would be the "best and fastest way to increase the value of your investment in HP." The company's letter comes after Walter Hewlett sent his own letter to investors earlier in the week, according to the Journal.

A vote on the merger is expected in June.