Although its $19 billion takeover of Compaq closed in early May, the new Hewlett-Packard is facing a number of financial and legal challenges as it looks to integrate the operations of two massive IT vendors. In documents filed with the Securities and Exchange Commission this week, HP provided a look at some of the hurdles it's facing.
The company says it will incur costs of up to $2.6 billion related to the merger. The money will be used to cover employee terminations, the closure of unspecified HP and Compaq facilities, and costs associated with exiting some businesses. HP says some of those costs will show up as a charge against earnings on its third-quarter earnings statement, due in August. HP also said it will issue notes representing $1.5 billion worth of unsecured debt. Funds from the notes sale, according to the company, could be used to finance further acquisitions.
Also looming over HP, according to the SEC documents, are ongoing investigations by authorities into alleged irregularities in the shareholder vote that led to the merger's approval. Both the SEC District Office in San Francisco and the U.S. Attorney's Office for the Southern District of New York are investigating allegations that HP used improper means to persuade Deutsche Bank to vote for the merger.
Deutsche Bank is HP's eighth-largest institutional shareholder and is one of three investment banks chosen by the company to manage the notes issuance. Banc of America, HP's second-largest institutional shareholder, also is among the three, along with JP Morgan Securities. HP representatives didn't immediately return calls.