Packard Foundation opposes HP-Compaq

UPDATE: In a blow that could derail Hewlett-Packard's proposed $25 billion takeover of Compaq Computer, the David and Lucile Packard Foundation reached a preliminary decision Friday to oppose the deal.

"The board of trustees understands the strategic considerations being addressed by management, but after thorough study and analysis the board has preliminarily decided, on balance, that the best interests of the foundation would be better served by Hewlett-Packard not proceeding with the proposed transaction," Packard Foundation Chairman Susan Packard Orr said in a statement.

The foundation, which holds a roughly 10 percent stake in HP, is seen as a crucial swing vote.

Both HP and Compaq reaffirmed their commitment to the deal, according to a statement released after the Packard Foundation announcement.

"We are disappointed by the Packard Foundation's preliminary decision. Nevertheless, our responsibility to shareowners, customers and employees requires that we maintain a pragmatic view of the business and a focus on the future," the companies said.

An HP representative said the company hopes to change the minds of Hewlett and Packard family members.

"Over the coming weeks, we'll continue to provide additional information to shareowners about the merger, and we believe they will increasingly understand its benefits," the representative said.

The merger is already opposed by Walter Hewlett, an HP board member and the son of co-founder William Hewlett. It is also opposed by David W. Packard, son of HP co-founder David Packard. Family members opposing the deal hold nearly 8 percent of HP's shares.

News source: CNET

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