Hewlett-Packard on Friday released a letter to shareholders bashing dissident board member Walter Hewlett for his opposition to the company's planned acquisition of Compaq Computer.
"Walter Hewlett, an heir of HP co-founder Bill Hewlett, is a musician and academic who oversees the Hewlett family trust and foundation," the letter states. "While he serves on HP's board of directors, Walter has never worked at the company or been involved in its management. His motivations and investment decisions are likely to be very different from your own."
HP is fighting to gain shareholder approval of the deal amid opposition from Walter Hewlett and other members of the Hewlett and Packard families and their foundations--who collectively hold roughly 18 percent of HP's shares.
Assuming the family members don't change their opinions, HP will need roughly two-thirds of remaining shareholders to support the deal. Although HP has been making its case in regulatory filings, press releases and an advertising campaign, Friday's letter is its first direct appeal to individual shareholders.
The letter, which comes amid a two-day meeting of HP's board of directors, is signed by the entire board, with the exception of Walter Hewlett. It is the latest in the escalating war of words over the multibillion-dollar deal and comes two days after Walter Hewlett penned a letter of his own to HP shareholders.
A representative for Hewlett took issue with the letter.
"Clearly, HP must have heard from stockholders that Mr. Hewlett's arguments are resonating. Why else would they resort to such personal attacks?" the representative said. "Mr. Hewlett is not alone in his opposition. Stockholders and analysts have been overwhelmingly opposed to the transaction."
HP had characterized Hewlett differently in last year's proxy when it re-nominated him to the board of directors.
"Mr. Hewlett has been an independent software developer involved with computer applications in the humanities for more than five years," the company said at the time. "In 1994, Mr. Hewlett participated in the formation of Vermont Telephone Company."
Hewlett has been an HP board member since 1987.
Before the proposed merger was announced on Labor Day, Hewlett voted in favor of the merger as a board member. But in November, he publicly came out in opposition to it, followed a day later by David Woodley Packard, son of HP co-founder David Packard.
The David and Lucile Packard Foundation, HP's largest shareholder, announced in December its preliminary decision to oppose the deal.
In Friday's letter, HP said it spent two years exploring various alternatives and reiterated why the board believes the Compaq deal is HP's best alternative.
"The problem isn't just that he is saying 'no' to the merger--he's giving us nothing to say 'yes' to," the letter states. "While opposing the merger, he has failed to propose any alternatives that your board hasn't already analyzed, debated and rejected because they fail to create sufficient shareowner value."
The company repeated its contention that the deal will add $5 to $9 per share in value by cutting $2.5 billion in costs.
"This sounds like a good deal because it is," the letter states.