EU approves $23.6B HP-Compaq merger

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Posted 1:20PM on Thursday, January 31, 2002

BRUSSELS, BELGIUM - The European Union on Thursday approved the $23.6 billion merger of computer rivals Hewlett-Packard Co. with Compaq Computer Corp. without requiring divestments. The deal has also been cleared by Canadian antitrust authorities without major conditions while the U.S. review is still underway. ``A careful analysis of the merger, the largest ever in the information technology sector, 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,'' an EU statement said. The merger of the two U.S. computer companies forced the EU Commission into its biggest European antitrust decision since it blocked the $46 billion bid by General Electric for Honeywell last year. The decision by the EU's antitrust office gives the companies clearance to move ahead and indictates the EU will not launch a more detailed four-month investigation into competitive issues raised by the deal. A four-month in-depth probe by the European Commission would have been especially problematic for HP as it tries to rein in rebellious shareholders who have opposed the deal, observers said. Instead, early clearance in Europe could help HP win over some shareholders. A source close to the talks but speaking on condition of anonymity said all sides were involved in tough negotiations until the last days, with Germany's Siemens pushing hard to have the European Commission extend the investigation. Fujitsu-Siemens Computers is among the top 10 manufacturers of servers in the world and was one of the few companies to argue against the merger. HP and Compaq together would have only about 22-23 percent of the European market for personal computers, but around 47 percent of the market for more powerful servers and disk storage units, according to market researchers Gartner-Dataquest. Palo Alto, Calif.-based HP and Houston-based Compaq have said they would await regulatory clearance before setting a date for a shareholder vote. In midday trading on the New York Stock Exchange, HP shares were down 33 cents at $21.63 while Compaq shares rose 16 cents to $12.15.