'No' vote gathering support in HP merger row

Walter Hewlett's followers stand up ready to be counted...

Black clouds are gathering over Hewlett Packard's Palo Alto headquarters today as it emerges that the majority of employees and one of the company's larger investors are against the Compaq merger. Brandes Investment, holder of a 1.3 per cent stake in HP, has come out against the $21.7bn acquisition of Compaq. Vinit Bodas, partner and senior analyst at Brandes, said the deal was a bold and gutsy move but it posed a large risk for shareholders. Bodas claimed HP will fare better if it follows the plan outlined by chief dissident Walter Hewlett last week. Hewlett proposed the company focuses its business on enterprise offerings and potentially spinning off its imaging and printing business. Bodas believes this will bring the highest value to shareholders. Brandes is not alone in its opposition. Earlier this month, Victory Capital Management, owner of seven million shares - or a 0.36 per cent stake - said it will vote against the transaction. Matrix Asset Advisors also said it will use its 0.03 per cent stake to say 'no' to the merger. The Hewlett and Packard families have both been fighting to block the deal with their combined 18 per cent stake. However, HP chief Carly Fiorina is not without supporters. Last month, Alliance Capital Management Holding said it will use its 2.3 per cent stake to vote in favour of the merger. In addition, she could win large swathes of support if the Institutional Shareholder Service (ISS), which represents around 20 per cent of HP shareholders, comes out in favour of the deal. Meanwhile, David Packard has revealed that 63 per cent of employees in Boise, Idaho and Oregon think the merger is a bad idea. HP employees and retired workers currently hold a five per cent stake in the company. The news comes just three weeks before the company's crucial shareholders meeting on 19 March to vote on the transaction.