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FTC clears HP-Compaq

March 6, 2002 Posted: 1506 GMT

NEW YORK (CNN/Money) -- As expected, the Federal Trade Commission cleared Hewlett-Packard Co.'s $22 billion merger with Compaq Computer Corp. late Wednesday.

The vote from the FTC's five commissioners was unanimous and accepted the transaction without conditions, a spokesman said.

The agency said that it conducted an extensive investigation of the merger's effect on the market for personal computers, servers and microprocessors but did not find any reason to believe that it would impair competition.

"Completion of the FTC review marks a major milestone in the approval process, and we are now focused on winning the shareowner vote," HP Chairman and CEO Carly Fiorina said in a statement.

Dissident Walter Hewlett, son of one of the HP co-founders, expressed his disappointment with the decision. HP shareholders should be concerned since rivals Sun Microsystems, Dell, and IBM have not objected to the transaction, Hewlett said.

"We all know that regulators vociferously express concern when there is even a whiff of competitive advantage in a merger," he said. "This obviously did not happen here with HP's proposed acquisition of Compaq."

Hewlett has launched a bitter proxy battle to stop the HP-Compaq merger.

CNN/Money reported last week that the FTC would approve the merger. The agency's endorsement occurred a day after the transaction received the backing of Institutional Shareholder Services, a key proxy advisory firm. ISS recommended that its clients, which control a significant block (23 percent)  of HP shares, vote for the deal.

ISS Wednesday also recommended that Compaq shareholders vote in favor of the HP-Compaq merger. HP offers Compaq a premium in the merger and allows shareholders to participate in a computer services company that combines two strong technology brand names. Compaq would also have greater profit opportunities combined with HP than alone, ISS said.

"Finally, there appear to be no other comparable strategic alternatives on Compaq's horizon," the proxy advisory service said.

The FTC's approval also comes nearly two weeks before Hewlett-Packard shareholders are set to vote on the merger. HP stockholders will vote March 19, while Compaq will vote the next day. The companies expect to close the transaction in early April.

European regulators have already cleared the merger without adjustments. The European Commission, the executive body of the European Union, said in January that the deal does not raise competition concerns in Europe.

Shares of HP (HWP: down $0.13 to $20.05, Research, Estimates) dropped 2 percent Wednesday, while Compaq (CPQ: up $0.10 to $11.08, Research, Estimates) finished higher.


• Approval on HP
Feb. 28, 2002
• ISS backs HP
March 5, 2002


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