BRUSSELS: The European Commission said on Thursday it had approved without
conditions Hewlett-Packard Co.'s proposed $22.3 billion takeover of Compaq
Computer Corp.
"A careful analysis of the merger...and of the competitive forces in the
markets concerned has shown that HP would not be in a position to increase
prices and that consumers would continue to benefit from sufficient choice and
innovation," the Commission said in a statement.
European clearance, which had been widely expected, is not the final hurdle
for the merger of the two US-based global providers of computing and enterprise
technology solutions.
The transaction, which would be the largest merger in the history of personal
computers, remains under review by the Federal Trade Commission in the United
States and several other jurisdictions.
Its highest hurdle, however, will probably be winning shareholder approval in
a vote expected in March. "This is an important milestone, particularly
given the significance of Europe to us," said Michael Capellas, Compaq
chairman and chief executive officer, in a statement.
"We will continue to work with regulators around the world in satisfying
their requirements."
HP chief executive Carly Fiorina also welcomed the decision as "an
encouraging step in the continuing process of satisfying regulators worldwide
that this deal will provide a real stimulus for competition in information
technology markets".
Commission sees no domination risk
Fiorina has had a tough battle selling the merger, announced in September, after
members of 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 a necessary step. "To remain static is
to lose ground," Fiorina told an audience earlier this year, quoting Dave
Packard, the co-founder of HP.
Hewlett said in a letter to shareholders that the opponents also do not want
to lose ground: "We want it clearly understood we are not advocating a
'status quo' strategy for Hewlett-Packard. We advocate building on
Hewlett-Packard's strengths and dealing with its problems".
Fiorina commented in New York this week about the intense debate with the
family members. "There are people who find change exiting," she said.
"Others find it exhausting. Some find it exhilarating. Others find it
intimidating. Others know they will gain from it. Some fear they will lose from
it."
The European Commission said the merged group would continue to face strong
competition in Europe from a number of credible rivals, including IBM, Dell and
Fujitsu-Siemens.
It said this, along with the absence of significant barriers to entry and the
practice of non-exclusive contractual relationships between retailers and
manufacturers would prevent the new HP from attempting to raise prices
significantly.
It said the proposed deal was also unlikely to raise competitive issues in
the market for servers and printers.
(C) Reuters Limited.