NEWSWIRE - March 20, 2002

Topic: Mergers and Acquisitions

Source: "Nail-Byter: H-P Claims Victory on Compaq Merger; Foe Doesn't Concede," by Scott Thurm, Pui-Wing Tam, and Gary McWilliams, Wall Street Journal, March 20, 2002, page A1.

Synopsis of Article: The article discusses H-P's attempted merger with Compaq and the contesting of the merger by representatives of H-P's founders and other shareholder groups. The merger was put to a shareholder vote that ended this week. The preliminary count indicates that the merger was approved by a very slim majority of shareholders (approximately a 1 percent margin) and dissident shareholders are calling for a recount. The article provides an opportunity to discuss different opinions of the impact of mergers on shareholder value.

Questions and Teaching Note:

1. Why would H-P shareholders vote for the merger with Compaq? Why would they vote against it? Why would Compaq shareholders vote for or against the merger?
2. What is the capital market's assessment of the merger?
3. Why would the majority of H-P shareholders support an acquisition that destroys shareholder value for H-P?

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