Nation's Largest Pension Fund Dislikes H-P-Compaq Merger

Influential pension fund CalPERS, the California Public Employees Retirement System, joined the high-profile opponents of Hewlett-Packard's (HWP Quote) merger with Compaq (CPQ Quote). CalPERS is outspoken in its pursuit of securities litigation and corporate accountability, and its opinion will bear more weight than its 0.35% stake in H-P.

Friday afternoon CalPERS issued a recommendation to vote against the merger because of "immediate and potential long-term negative financial risk." Additionally, CalPERS objected to the price tag of the $25 billion deal and the "strategic uncertainty" surrounding the pairing. H-P shareholders are set to vote on March 19 to either approve or reject the deal.

The move will be music to rogue board member Walter Hewlett's ears. As a member of one of two founding families that control more than 18% of H-P shares, Hewlett has argued for the past several months that while the Compaq acquisition would make H-P a larger presence in many of its markets, it would erode shareholder value. Earlier in the week, CEO Carly Fiorina and H-P management won the backing of crucial advisory service Institutional Shareholder Services, which counts 20% of H-P's institutional shareholders among its clients. ...