New York Times coverage:
http://www.nytimes.com/2001/09/04/business/04DEAL.html
Press release follows.
-Declan
********
http://www.hp.com/hpinfo/newsroom/press/04sep01a.htm
Message-Id: <20010904141030.1E0811050C_at_cluebot.com>
HEWLETT-PACKARD AND COMPAQ AGREE TO MERGE, CREATING $87 BILLION GLOBAL
TECHNOLOGY LEADER
PALO ALTO, CA and HOUSTON, TX, September 3, 2001
_________________________________________________________________
Hewlett-Packard Company (NYSE: HWP) and Compaq Computer Corporation
(NYSE: CPQ) announced today a definitive merger agreement to create an
$87 billion global technology leader. The new HP will offer the
industry's most complete set of IT products and services for both
businesses and consumers, with a commitment to serving customers with
open systems and architectures. The combined company will have #1
worldwide revenue positions in servers, access devices (PCs and
hand-helds) and imaging and printing, as well as leading revenue
positions in IT services, storage and management software.
The merger is expected to generate cost synergies reaching
approximately $2.5 billion annually and drive a significantly improved
cost structure. 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 chief executive officer of HP, will be
chairman and CEO of the new HP. Michael Capellas, chairman and chief
executive officer of Compaq, will be president. Capellas and four
other members of Compaq's current Board of Directors 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," said Fiorina. "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."
Capellas said, "We are creating a new kind of industry leader -- one
founded on customer success, world-class engineering, and best of
breed products and services. In sharp contrast to our competitors, we
are committed to leading the industry to open, market-unifying
architectures and interoperability, which reduce complexity and cost
for our customers. With this move, we will change the basis of
competition in the industry."
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% and Compaq shareowners 36% 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.
The transaction is expected to be substantially accretive to HP's pro
forma earnings per share in the first full year of combined operations
based on achieving planned cost synergies. Cost synergies of
approximately $2.0 billion are expected in fiscal 2003, the first full
year of combined operations. Fully realized synergies are expected to
reach a run rate of approximately $2.5 billion by mid-fiscal 2004.
These anticipated synergies result from product rationalization;
efficiencies in administration, procurement, manufacturing and
marketing; and savings from improved direct distribution of PCs and
servers. Subject to regulatory and shareowner approvals and customary
closing conditions, the transaction is expected to close in the first
half of 2002. In connection with the transaction, both companies have
adopted shareowner rights plans; information on these plans will be
filed today with the Securities and Exchange Commission.
The merged entity will be headquartered in Palo Alto and retain a
significant presence in Houston, which will be a key strategic center
of engineering excellence and product development.
The new HP will be structured around four operating units that build
on the companies' similar go-to-market and product development
structures to provide clear customer and competitive focus. Leadership
and estimated revenues (calculated by combining the two companies'
trailing four reported fiscal quarters) are as follows:
* A $20 billion Imaging and Printing franchise to be led by Vyomesh
Joshi, currently president, Imaging and Printing Systems, of HP.
* A $29 billion Access Devices business to be led by Duane Zitzner,
currently president, Computing Systems, of HP.
* A $23 billion IT Infrastructure business, encompassing servers,
storage and software, to be led by Peter Blackmore, currently
executive vice president, Sales and Services, of Compaq.
* A $15 billion Services business with approximately 65,000
employees in consulting, support and outsourcing to be led by Ann
Livermore, currently president, HP Services.
The chief financial officer of the combined entity will be Robert
Wayman, chief financial officer of HP. The integration team will be
led by Webb McKinney, currently president of HP's Business Customer
Organization, and Jeff Clarke, chief financial officer of Compaq.
Fiorina concluded, "Clearly, the potential of this combination is
compelling, but we understand the magnitude of the challenge and the
need for discipline and speed. We're helped by the fact that both
companies have been pursuing similar organizational structures and
sales force models, and there is immense talent resident in both
organizations. We have done comprehensive integration planning and
have clear metrics to drive our success. We are committed to achieving
the synergies we have identified while maintaining our competitive
position and momentum in the marketplace."
Investment Community and Media Event Information
The companies will host a meeting for the investment community
Tuesday, Sept. 4, at 9 a.m. EDT at the Equitable Building in New York
City, 787 Seventh Avenue (between 51st & 52nd streets) in the
Auditorium, Lower Level. Those unable to attend may listen by calling
(888) 849-9184 (US) or (212) 896-6074 (international), using
reservation number: 19649821. The event can also be accessed via
audiocast at www.hp.com or www.compaq.com. The slides used for this
presentation will be available on each company's website 10 minutes
prior to the start of the event. A replay will be available for 14
days following the meeting at (800) 633-8284 (US) or (858) 812-6440
(international), using reservation number: 19649821. There will also
be a question and answer session for the media at 10:30 a.m. EDT
following the analyst meeting, also in the Equitable Auditorium. Those
unable to attend may participate by calling (888) 754-3420 (US) or
(212) 676-5416 (international), using reservation number: 19650338.
The event can also be accessed via audiocast at www.hp.com or
www.compaq.com. A replay will be available for 14 days following the
meeting at (800) 633-8284 (US) or (858) 812-6440 (international),
using reservation number: 19650338.
Fact Sheet
A fact sheet related to the merger is attached to this press release.
Calculation of Combined Revenues
The statements of combined revenues in this release and the attached
fact sheet are estimates and have been calculated by adding similar
category information from the companies' separate filings with the
Securities Exchange Commission for each of their past four fiscal
quarters. Because the companies have different fiscal year-ends, these
estimates do not track a matching time period. The measurement method
described above may result in amounts that differ from amounts
resulting from other methodologies the companies may use in the
future.
About HP
Hewlett-Packard Company -- a leading global provider of computing and
imaging solutions and services -- is focused on making technology and
its benefits accessible to all. HP had total revenue from continuing
operations of $48.8 billion in its 2000 fiscal year. Information about
HP and its products can be found on the World Wide Web at www.hp.com.
About Compaq
Compaq Computer Corporation is a leading global provider of enterprise
technology and solutions. Compaq designs, develops, manufactures and
markets hardware, software, solutions and services, including
industry-leading enterprise storage and computing solutions,
fault-tolerant business-critical solutions, communication products,
and desktop and portable personal computers that are sold in more than
200 countries. Information on Compaq and its products and services is
available at www.compaq.com.
Additional Information and Where to Find It
HP intends to file a registration statement on Form S-4 in connection
with the transaction, and HP and Compaq intend to mail a joint proxy
statement/prospectus to their respective stockholders in connection
with the transaction. Investors and security holders of HP and Compaq
are urged to read the joint proxy statement/prospectus when it becomes
available because it will contain important information about HP,
Compaq and the transaction. Investors and security holders may obtain
a free copy of the joint proxy statement/prospectus (when it is
available) at the SEC's web site at www.sec.gov. A free copy of the
joint proxy statement/prospectus may also be obtained from HP or
Compaq. HP and its executive officers and directors may be deemed to
be participants in the solicitation of proxies from the stockholders
of HP and Compaq in favor of the transaction. Information regarding
the interests of HP's officers and directors in the transaction will
be included in the joint proxy statement/prospectus. Compaq and its
executive officers and directors may be deemed to be participants in
the solicitation of proxies from the stockholders of HP and Compaq in
favor of the transaction. Information regarding the interests of
Compaq's officers and directors in the transaction will be included in
the joint proxy statement/prospectus. In addition to the registration
statement on form S-4 to be filed by HP in connection with the
transaction, and the joint proxy statement/prospectus to be mailed to
the stockholders of HP and Compaq in connection with the transaction,
each of HP and Compaq file annual, quarterly and special reports,
proxy and information statements, and other information with the SEC.
Investors may read and copy any of these reports, statements and other
information at the SEC's public reference rooms located at 450 5th
Street, N.W., Washington, D.C., 20549, or any of the SEC's other
public reference rooms located in New York and Chicago. Investors
should call the SEC at 1-800-SEC-0330 for further information on these
public reference rooms. The reports, statements and other information
filed by HP and Compaq with the SEC are also available for free at the
SEC's web site at www.sec.gov. A free copy of these reports,
statements and other information may also be obtained from HP or
Compaq.
HP/COMPAQ FACT SHEET
Transaction Summary:
Structure: Stock-for-stock merger
Exchange Ratio: 0.6325 of an HP share per Compaq share
Current Value: Approximately $25 billion
Ownership: HP shareholders 64%; Compaq shareholders 36%
Accounting: Purchase
Expected Closing: First half of 2002
Overview:
* Creates an $87 billion global technology leader, with the
industry's most complete set of IT products and services for both
businesses and consumers.
* New HP would be the #1 global player in servers, imaging &
printing, and access devices (PCs & hand-helds), as well as Top 3
player in IT services, storage and management software.
* The combination furthers each company's commitment to open,
market-unifying systems and architectures and aggressive direct
and channel distribution models.
* Combined company can create substantial shareowner value through
significant cost structure improvements and access to new growth
opportunities.
* Transaction expected to be substantially accretive to pro forma
EPS in first full year of combined operations.
* The merger is expected to generate cost synergies of approximately
$2.0 billion in fiscal 2003, the first full year of operations;
fully realized synergies are expected to reach a run rate of
approximately $2.5 billion by mid-fiscal 2004.
* New HP would have operations in more than 160 countries and over
145,000 employees.
Key Facts
(last 4 qtrs): HP Compaq Pro Forma Combined
Total
Revenues $47.0 billion $40.4 billion $87.4 billion
Assets $32.4 billion $23.9 billion $56.4 billion
Operating
Earnings $2.1 billion $1.9 billion $3.9 billion
Leadership:
* Board of Directors: 5 Compaq directors to join HP Board
* Chairman and Chief Executive Officer: Carly Fiorina
* President: Michael Capellas
* Chief Financial Officer: Robert Wayman
* Imaging & Printing: Vyomesh Joshi
* Access Devices: Duane Zitzner
* IT Infrastructure: Peter Blackmore
* Services: Ann Livermore
_________________________________________________________________
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Intro
