Hewlett-Packard Co's proposed US$23.6 billion purchase of rival Compaq Computer Corp won the European Commission's unconditional antitrust approval, removing a barrier to completing the transaction.
Competition Commissioner Mario Monti didn't require the companies to reduce their business, saying the transaction wouldn't curb competition in Europe for personal computers, printers and servers.
Approving the acquisition -- the EU's biggest case since blocking General Electric Co's US$47 billion planned purchase of Honeywell International Inc in July -- helps Hewlett-Packard Chief Executive Carly Fiorina's effort to overcome opposition led by shareholders of the company's founding families.
"Momentum is shifting toward the company," said Tom Burnett, president of Merger Insight, which advises on investing in merger candidates. Still "there are a lot of angry shareholders here. It's going to be a very close vote. The odds are slightly in favor of the dissidents."
The two companies will command as much as 60 percent of some European server markets, topping the 40 percent threshold that normally rings alarm bells for competition regulators. The commission's decision means that a four-month investigation won't be conducted.
Shares of Palo Alto, California-based Hewlett-Packard rose US$0.15 to US$22.11. Houston-based Compaq rose US$0.36 to US$12.35.
The companies still need an antitrust ruling from the US Federal Trade Commission (FTC) spokesman Mitch Katz declined to comment on when a decision would be made, saying the inquiry is pending. Canadian antitrust regulators approved the plan Dec. 20.
"I'm much more confident than I was a ways back" that the sale will go through, Compaq CEO Michael Capellas said in an interview. "I think the momentum has shifted." Hewlett-Packard board member Walter Hewlett and other relatives of the company's late founders oppose the acquisition.
Walter Hewlett, son of founder William Hewlett, started a proxy fight late last year to block the transaction, saying that adding Compaq's PC business will hurt shareholders.
The families and their foundations control about 18 percent of Hewlett-Packard, the second-largest computer maker after International Business Machines Corp Shareholders of the two companies may vote as soon as March on whether to approve the deal.
Walter Hewlett is still pressing executives to bring a vote soon, spokesman Todd Glass said. He said competitors including Dell Computer Corp and Sun Microsystems Inc didn't object to EU clearance, a sign that the purchase is bad for Hewlett-Packard.
"Dell, Sun and IBM must be delighted at the prospect of a merger that would so greatly distract and damage two of their rivals," Hewlett said in a statement.
Compaq shares are trading at 11 percent less than the value of Hewlett-Packard's bid. The discount was as steep as 37 percent on Nov. 12.
The European Commission, the Brussels-based EU's executive body, said the combination would be the biggest ever in the information-technology industry.
The "merged entity will continue to face strong competition in Europe from a number of credible rivals," the commission concluded. The non-exclusive nature of contracts with retailers and the lack of significant barriers to companies entering European markets would limit Hewlett-Packard's ability to raise prices "significantly," the commission also said.
The united company would be the largest maker of personal computers, servers and printers and rank among the top three in services, storage devices and management software. The combined company would still face competition in Europe from PC makers such as Dell and IBM, the commission said.
"We see it 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," Fiorina said in a statement.
The commission may block or force changes to mergers between companies with combined global sales of 5 billion euros (US$4.5 billion) and EU sales of 250 million euros each, even if the companies aren't based in the 15-nation EU.
The one-month, fast-track clearance spares the companies the longer process that led Monti to veto General Electric's bid for Honeywell.
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