EU may delay Compaq-Digital deal Decision likely next week over whether takeover by Compaq faces long inquiry

Personal computers

March 21, 1998|By BLOOMBERG NEWS

BRUSSELS, Belgium -- Compaq Computer Corp.'s $8.35 billion acquisition of Digital Equipment Corp. is likely to face a full inquiry by the European Union, possibly delaying the computer industry's biggest takeover, analysts and lawyers said yesterday.

The European Commission, which enforces EU antitrust policy, is expected to disclose early next week whether it will extend its deadline for a decision by four months. That could push a ruling into late July.

Regulators are investigating whether a combination of No. 1 personal computer maker Compaq with Digital will limit a rival's access to the European market for PCs and computer services. Compaq hopes to complete the acquisition by June.

"Because it's so big and so high-profile, we do expect a lengthy investigation," said Tom Burnett, founder of Merger Insight, a New York-based institutional research firm. He added that final approval is likely.

The acquisition would make the combined company second only to International Business Machines Corp., and give it access to Digital's high-powered computers and well-regarded services.

Compaq said it still expects the purchase to go through as planned.

A spokesman said the company has been in contact with EU officials and that Compaq expects the acquisition to close in the second quarter.

A commission spokesman declined to comment on whether the review will be extended. Olivier Bertrand, a manager of Compaq's European operations, also wouldn't comment on how sees the investigation progressing.

The EU has prolonged investigations in the past. Most recently, it said it will extend its inquiry into WorldCom Inc.'s $41.8 billion acquisition of MCI Communications Corp. after an initial review.

Boeing Co. went through a seven-month inquiry to complete its acquisition of McDonnell Douglas Corp., ultimately making concessions to win EU approval.

For Compaq, with 8,500 employees in Europe, the acquisition means access to Digital's customer service business, with about $6 billion in annual sales.

Compaq, which has no service business of its own, has been using Digital's worldwide customer service network since 1995.

The commission has never reviewed a combination of two major companies in the computer industry, said Stephen Kinsella, an EU antitrust lawyer at Herbert Smith.

Previous computer industry cases under EU review have involved large companies buying smaller units from competitors, said.

Pub Date: 3/21/98

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