Compaq shares took a 14 per cent dive yesterday after a shareholder announcement cast doubts over the future of the merger with Hewlett Packard (HP).
At a meeting held last Friday the David and Lucille Packard Foundation, controlled by three Packard sisters who hold a 10 per cent stake, voted against the merger. The Packard Foundation is HP's largest shareholder.
Combined with the shares of David Packard and Walter Hewlett, who own about seven per cent in total, there is already a 17 per cent block in opposition to the deal. But it is clear that the Compaq and HP chiefs, Michael Cappellas and Carly Fiorina repectively, are still pushing ahead with the deal.
UBS Warburg analysts have also cast doubts over the transaction based on Friday's results saying that, if the deal is off, Compaq should close proceedings quickly and set about the task of reassuring customers.
UBS also recommended that Compaq waive the $675m break-out fee as part of letting all involved out of the transaction.
A joint Compaq/HP statement said: "We strongly believe that we will be able to obtain share owner approval, despite this development."
A proxy solicitation firm was recently hired by HP to help out with the potentially difficult shareholder meetings.
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