Proxy Advisor Backs H-P/Compaq Combination

March 5, 2002 ( - Supporters of the proposed merger of Hewlett-Packard and Compaq Computer got a much-needed boost from a major proxy advisory firm.

Rockville, Maryland-based Institutional Shareholder Services (ISS) has thrown its support to the proposed $22 billion deal – and analysts expect the recommendation to influence the final decision by a significant number of institutional investors. 

Thanks, But?

Patrick McGurn, a vice president at ISS told a press conference. “While Mr. Hewlett makes a credible case that the risks associated with the transaction are real and material, we believe that management’s upside scenario is achievable.”

But ISS also said it believes that dissident shareholder and board member Walter Hewlett “deserves shareholders’ thanks” for raising key questions about the deal, according to the Wall Street Journal.

Institutional ‘Bias?’

More than half (57%) of H-P shares are held by institutions, 25% by individuals and 18% by the Hewlett and Packard families.  That latter group has taken a firm and vocal position against the proposed merger. 

Analysts expect 10% or more of HP shareholders, including index funds and Barclays Global Investors, whose CEO sits on the HP board, to follow the ISS recommendation, according to Reuters.  ISS advises 700 funds how to vote in proxy battles.

HP shareholders vote on the deal in a March 19 meeting, and Compaq will consider the merger a day later.