Compaq is to pay $9.6 billion for Digital Equipment, in a deal that has been expected for a long time but still took Wall Street by surprise.
Shareholders in Digital will receive $30 in cash and .95 shares in Compaq stock, while Compaq will raise $4.8 billion of cash and issue 150 million shares of stock.
Digital will become a wholly owned subsidiary of Compaq under the terms of the deal, which will need approval by antitrust authorities in the US. They are already investigating details of Intel?s deal with Digital over the Alpha processor last year.
Bob Palmer, CEO of Digital said: ?This merger gives Digital the scale and resources to make continued investment in our key technologies and services.?
Eckhard Pfeiffer, CEO of Compaq, said: ?Digital?s focused enterprise strategy coupled with demonstrable improvements in operational performance make this a timely choice for us.? A few weeks ago, Digital showed a doubling of profits and an increase in turnover.
Peiffer admitted that Compaq was interested in Digital?s customer base. He said: ?We put tremendous value on the customer relationships Digital has cultivated over the past 40 years. We will invest in its worldwide service organisation as well as its 64-bit leadership with Alpha, Open VMS, Digital Unix and Windows NT.?
He added that it helped Compaq?s stated goal of becoming one of the top three global IT companies and aided it in its role to become the leader in the enterprise sphere.
According to Compaq, the deal will give it the largest channel network in the world, delivering over 80 per cent of products and solutions. The deal is expected to be completed in the second quarter of 1998.
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