News

HP to Acquire Compaq in Stock Swap

• 09/04/2001

Hewlett-Packard Company and Compaq Computer Corporation announced on Monday a $25 billion stock swap plan to merge the companies under the Hewlett-Packard name. The combined company -- if the merger is successful -- is expected to have total revenue only slightly less than IBM Corp. The deal is considered one of the largest in technology industry history.

Based on both companies' last four reported fiscal quarters, the new HP would have approximate pro forma assets of $56.4 billion, annual revenues of $87.4 billion and annual operating earnings of $3.9 billion. It would also have operations in more than 160 countries and over 145,000 employees.

Carly Fiorina, chairman and CEO of HP, will continue in those roles. Compaq Chairman and CEO Michael Capellas will be president of the merged company. Capellas and four other Compaq board members will join HP's board upon closing.

"This is a decisive move that accelerates our strategy and positions us to win by offering even greater value to our customers and partners," Fiorina said in a statement. "In addition to the clear strategic benefits of combining two highly complementary organizations and product families, we can create substantial shareowner value through significant cost structure improvements and access to new growth opportunities. At a particularly challenging time for the IT industry, this combination vaults us into a leadership role with customers and partners—together we will shape the industry for years to come."

Under the terms of the agreement, unanimously approved by both boards of directors, Compaq shareowners will receive 0.6325 of a newly issued HP share for each share of Compaq, giving the merger a current value of approximately $25 billion. HP shareowners will own approximately 64 percent and Compaq shareowners 36 percent of the merged company. The transaction, which is expected to be tax-free to shareowners of both companies for U.S. federal income tax purposes, will be accounted for as a purchase.

Subject to regulatory and shareowner approvals and customary closing conditions, the transaction is expected to close in the first half of 2002. The company will be headquartered in Palo Alto, though Houston will remain as a strategic center for engineering and product development.

The new HP will be structured around four operating units:

• Imaging & Printing
led by Vyomesh Joshi, currently President, Imaging and Printing Systems, of HP.
• Access Devices
led by Duane Zitzner, currently President, Computing Systems, of HP.
• IT Infrastructure
, includes servers, storage and software, to be led by Peter Blackmore, currently Executive Vice President, Sales and Services, of Compaq.
• Services
, includes consulting, support and outsourcing, to be led by Ann Livermore, currently President, HP Services.