Banking & Capital Markets

HP-Compaq: The Early Line

Where to sneak a peak into the merger's potential outcome. Also: a lonely IPO, some good news for a change, and the SEC's financial oversight panel.
Craig SchneiderMarch 4, 2002

While shareholders won’t vote on the proposed merger of Hewlett-Packard and Compaq Computer for a few weeks, analysts will look to Institutional Shareholder Services (ISS) this week for a potential glimpse into the ballot box.

Where ISS goes, so may go the fate of the merger. The organization, which advises some 700 funds on how to vote in proxy battles, is expected to reveal its position on the merger by Tuesday. And an estimated 10 percent of HP shares — a block that could determine the $22 billion deal’s outcome — will be voted in accordance with the ISS opinion, Reuters said.

The ISS is widely expected to side with HP management and endorse the deal. “If the vote favors the merger, then it certainly ups the odds considerably, but if the ISS vote goes against it, it is probably a toss up. I don’t think it will destroy it,” says Noel Dedora, portfolio manager at San Francisco’s Fremont Investment Advisors, in the Reuters reported.

The Lonely IPO Crowd

Despite some positive economic indicators and comments by Fed Chairman Alan Greenspan last week that sent the equity markets upward on wings of recovery hopes, the lack of initial public offerings still leaves a sour aftertaste. Following last week’s IPO of Integrated Defense Technologies, expect another lone offering this week: Tsakos Energy Navigation.

Tsakos is slated to make its market debut on Friday, hoping to raise $107.95 million in the process. The Greek maker of oil tankers is expected to price 6.35 million shares between $16 and $18 a pop. Tsakos reported 2000 revenue of $111.3 million and net income of $14 million. The lead manager is J.P. Morgan. Tsakos says it plans to use the proceeds to pay about $74.7 million of the $392.8 million aggregate amount required to complete its 10-vessel, new-building program. It also intends to repay $40 million of debt.

Tsakos is offering common shares—an unusual move, since foreign companies usually issue American Depository Shares (ADRs). Japan’s mobile communications giant NTT DoCoMo did just that last Friday, gaining close to 4 percent on the NYSE in a move meant to boost its profile in the United States rather than to raise capital.

Still, an IPO can score market gains. Integrated Defense Technologies, for instance, was up 14 percent on its first day of trading last week, raising $154 million.

Into the Win Column

And now for a slightly sweeter taste. This Friday, at 8:30 in the morning, the Bureau of Labor Statistics is slated to release its employment report for February. The unemployment rate is expected to be 5.8 percent, , up from 5.6 percent in January, according to Briefings.com.

Come to think of it, the capital markets had plenty of good news to digest last week. The Institute for Supply Management said its purchasing managers’ index rose to 54.7 percent in February from 49.9 the previous month, indicating that manufacturing had moved over from decline to expansion. Analysts had expected a reading of just 50.9 percent. Gross domestic product burgeoned to a revised 1.4 percent in the fourth quarter from a previously reported 0.2 percent gain. On Wednesday, Greenspan said that the Fed sees no need to start raising interest rates anytime soon, citing expectations of subdued economic recovery and low inflation.

SEC Tackles Auditor Oversight, Financial Disclosures

The Securities and Exchange Commission kicked off its two-day roundtable discussion on reform for auditor oversight and financial disclosures today in New York City. Among those expected to opine on improving financial disclosures Monday morning included: Warren Buffett of Berkshire Hathaway; Dwight Churchill, head of Fidelity’s fixed income division; Stephen Friedman, a senior principal of MMC Capital; Dick Grasso, New York Stock Exchange chairman and CEO.

From 2 PM to 4 PM on Monday, the following luminaries were scheduled to expand on the theme of auditor oversight: William Allen, New York University School of Law; Warren Buffet; James Copeland, the Deloitte & Touche CEI; David Shedlarz, Pfizer’s CFO; Melvyn Weiss, of Milberg, Weiss, Bershad, Hynes & Lerach.

The SEC will offer free, live Webcasts of the events on its Web site. On March 6, the SEC will host the roundtable in the commission’s Washington, D.C. headquarters.