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What the $25 billion figure meant
The figure was the announced value of the shares offered, not a fixed cash purchase price. Because the consideration consisted of newly issued HP stock, its market value was tied to share prices. The companies’ announcement said both boards had unanimously approved the merger agreement and expected HP shareholders to own about 64% of the combined company, with Compaq shareholders owning about 36%. HP and Compaq’s September 3, 2001 announcement
Why HP and Compaq proposed combining
The companies presented the merger as a way to create a broader technology business spanning hardware and services. They described the planned company as an “$87 billion global technology leader,” and cited expected strength in servers, PCs and handheld devices, imaging and printing, as well as leading positions in IT services, storage and management software. Those were the companies’ strategic claims about the proposed combination.
The same announcement estimated pro forma annual revenue of $87.4 billion, calculated using the companies’ last four reported fiscal quarters. This was a historical revenue estimate, not a forecast of future revenue or a measure of the deal’s eventual success.
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Projected cost savings
HP and Compaq forecast approximately $2.0 billion in cost synergies in fiscal 2003, rising to about $2.5 billion annually at full run rate by mid-fiscal 2004. The companies described these as expected savings; the announcement does not establish that they were achieved. Their phrasing was: “The merger is expected to generate cost synergies reaching approximately $2.5 billion annually.” Joint announcement, September 3, 2001
How HP defended the deal’s value
HP made the case for the proposed combination in communications to shareholders, arguing that the price was fair and using revenue-multiple comparisons to support its position. That material documents HP’s argument to investors; it is not independent confirmation that the valuation was objectively fair. HP shareholder filing
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What the FTC concluded
On March 6, 2002, the Federal Trade Commission said it had investigated potential competitive effects in personal computers, servers, microprocessors and other areas. After a 5–0 vote, it closed its investigation without enforcement action, saying it found no reason to believe the transaction would impair competition in any relevant market. That is the FTC’s conclusion; it should not be read as a record of every regulator’s decision worldwide. FTC statement, March 6, 2002
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- This Certified Refurbished product is tested and certified to look and work like new. The refurbishing process includes functionality testing, basic cleaning, inspection, and repackaging. The product ships with all relevant accessories, a minimum 90-day warranty, and may arrive in a generic box. Only select sellers who maintain a high-performance bar may offer Certified Refurbished products on Amazon.com.
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