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EU expected to clear HP purchase of Compaq

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CIOL Bureau
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BRUSSELS: Hewlett-Packard Co. is expected to win approval from the European

Commission for its plan to buy Compaq Computer Corp in a $25 billion deal, an EU

source said on Thursday.

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The source added the Commission would not impose conditions on the

transaction. An HP spokeswoman at company headquarters in California had no

immediate comment, and referred questions to a colleague in Switzerland, who was

not immediately available.

The deal is an important test of antitrust relations between the EU and the

United States. In a controversial move, the European Commission last year

blocked General Electric's planned $42 billion purchase of Honeywell, prompting

US criticism.

It was the first time that European regulators had killed a merger approved

by their US counterparts. The US Federal Trade Commission has yet to rule on the

HP/Compaq deal. However, regulatory clearance is not the only hurdle the deal

faces. The shareholder vote on what would be the largest merger in personal

computer history is due in early March, with the outcome far from certain.

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HP chief executive Carly Fiorina has had a tough battle selling the merger,

announced on September 4, after members of both the Hewlett and Packard founding

families said in December they planned to vote against the deal.

HP board member Walter Hewlett and other critics say that purchasing Compaq

would dilute the value of the company's well-known imaging franchise -- printers

and fax machines -- and saddle it with a big PC division when a focus on the

development of high end machines was needed.

But Fiorina has said the deal is the next, necessary step for the firm.

"To remain static is to lose ground," Fiorina told an audience in Las

Vegas in early January, quoting Dave Packard, the co-founder of HP.

(C) Reuters Limited.

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