HP/COMPAQ: FTC gives green light to acquisition

Hewlett-Packard Co.'s proposed acquisition of Compaq Computer Corp. passed a regulatory hurdle Wednesday when the U.S. Federal Trade Commission (FTC) concluded its review of the deal.

As shareholders and company executives continued to exchange jabs over the proposal, the FTC voted unanimously to close its investigation into the acquisition without demanding any changes to the terms of the proposed deal. The agency, which monitors market competition, said it "did not find reason to believe that the proposed transaction would impair competition in any relevant market," according to a statement.

The FTC is just the latest government agency to give HP a thumbs-up in its effort to acquire Compaq. The European Union cleared the deal on Jan. 31. A month earlier, the Canadian Competition Bureau completed its review of the proposed buyout, finding no issues of competitive concern.

FTC Commissioner Mozelle Thompson provided some details on the FTC's decision in a statement attached to Wednesday's vote.

"After reviewing possible antitrust concerns in both the manufacturing and sales of personal computers as well as the market for 64-bit microprocessors for Unix servers, I, too, have concluded that the Commission should not challenge this acquisition," Thompson said in the statement. "The combination -- instead of reducing competition by eliminating a 64-bit chip rival -- may enhance the merged firm's capabilities."

While HP executives continue to promote the acquisition as a benefit to customers and the computer industry, the heirs of company founders William Hewlett and David Packard, who hold roughly 18 percent of the company's shares through individual ownership and family trusts, have come out against the proposed buyout. Walter Hewlett, a company board member and son of William Hewlett, has been the most vocal opponent of the deal, launching an aggressive media campaign.

On Wednesday, Institutional Shareholder Services Inc. (ISS), an influential investment group, threw its support behind the acquisition. ISS advises some of HP's largest shareholders, and its support could swing votes in favor of the deal. For example, Barclays Bank PLC has said it will vote its 3.1 percent stake in line with ISS' recommendation.

HP shareholders are expected to vote on the deal at a meeting on March 19. For the deal to go through, it will also require the approval of Compaq shareholders, who will vote at a separate meeting on March 20.

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Matt Berger

Computerworld
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