March 6, 2002 3:05 PM PST

FTC gives HP-Compaq the go-ahead

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The Federal Trade Commission voted unanimously Wednesday to approve Hewlett-Packard's bid to acquire Compaq Computer without conditions.

Officially, the FTC voted to close its investigation without taking action. That allows the deal to proceed as proposed, the FTC said.

FTC Commissioner Mozelle W. Thompson said in a statement that there were concerns about the merger, particularly that it would lessen competition in the 64-bit chip market. But he said the FTC was convinced otherwise by company management.

"This evidence leads me to conclude that the combination--instead of reducing competition by eliminating a 64-bit chip rival--may enhance the merged firm's capabilities and ensure a long-term competitor in the Unix server microprocessor market," Thompson said.

With the FTC nod, HP has cleared the last major regulatory hurdle for the deal, which still needs approval from the company's shareholders as well as those of Compaq.

"We are gratified by the FTC's decision. It validates our conviction from the outset that the merger can only enhance competition throughout our markets," HP Chief Executive Carly Fiorina said in a statement. "Completion of the FTC review marks a major milestone in the approval process, and we are now focused on winning the shareowner vote."

The European Union, which is perceived as a stricter regulator, gave its unconditional blessing to the deal Jan. 31.

HP shareholders are scheduled to vote either by proxy or in person at a March 19 shareholder meeting, although declaring a winner may take some time.

The company's bid for shareholder approval got a major boost Tuesday when advisory firm Institutional Shareholder Services recommended that its institutional investor clients approve the deal.

The merger is opposed by HP board member Walter Hewlett, son of William Hewlett, as well as by other members of the Hewlett and Packard families and several family foundations that collectively hold roughly 18 percent of HP shares.

In a statement, a representative for Hewlett said that the fact that HP's major competitors didn't object to the deal and regulators did not intervene is a sign that the merger does not give HP a competitive advantage.

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

Institutional shareholders representing 3 percent of HP shares have announced their opposition to the deal, while 8 percent of HP shareholders appear to have thrown their weight behind the deal.

HP said it hopes to close the deal in early April, assuming it garners shareholder approval.


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