Electronic Data Systems' shareholders will request postponement of a July 31 shareholder meeting on the proposed sale of the company to Hewlett-Packard pending full disclosure and correction of deficiencies in the agreement.
HP officials had announced a $13.9 billion deal to acquire EDS in May, in an effort to strengthen their services business.
"With increased revenues over the past 12 months and 2008 projections on track, the shareholders are questioning why EDS is accepting what many experts consider to be an undervalued share price," said Randall Baron of Coughlin, Stoia, Geller, Rudman & Robbins, LLP in San Diego.
Officials say the proposed sale locks the price of EDS stock at $25 per share, prohibits EDS directors from seeking a higher price from alternative bidders and guarantees Hewlett-Packard $375 million if the sale does not go through.
"Currently, this deal provides for tens of millions of dollars worth of benefits to EDS management, most of whom will continue to work for HP after the merger," said Bruce Steckler of Baron & Budd, P.C., of Dallas, one of the representing firms. "But, the average shareholders aren't even given the option to convert EDS stock to HP stock, so they're all going to be hit with unexpected tax bills on these undervalued earnings."
The transaction was expected to close in the second half of 2008 and more than double HP's service revenues, which amounted to $16.6 billion in fiscal year 2007.
HP officials anticipates that the transaction will be accretive to fiscal 2009 non-GAAP earnings and accretive to 2010 GAAP earnings. Significant synergies are expected as a result of the combination.
The specific service offerings delivered by the combined companies are IT outsourcing, including data center services, workplace services, networking services and managed security; business process outsourcing, including health claims, financial processing, CRM and HR outsourcing; applications, including development, modernization and management; consulting and integration and technology services.
Do you think the EDS/HP merger is a good move for the two companies? Send your comments to Associate Editor, Chelsey Ledue at chelsey.ledue@medtechpublishing.com.