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EDS Shareholder Sues to Block HP Merger

The suit asks a Delaware court to force EDS to auction itself off for a higher price

An EDS shareholder is suing the tech services company, claiming its planned $13.9 billion merger with Hewlett-Packard undervalues the company.

The suit was filed this week by Joseph Villari in Delaware Chancery Court. Villari wants the court to force EDS to auction itself off for a higher price.

HP agreed to acquire EDS earlier this month. The transaction, which values EDS at $25 per share, is expected to close in the second half of 2008. The $25 a share is a 32 percent premium over EDS's share price before HP's offer.

HP plans to create a new business unit that will house EDS's operations and be led by current EDS CEO Ron Rittenmeyer, who will report directly to HP CEO Mark Hurd. The new unit will go to market under the name "EDS -- an HP company."

In one stroke, the merger -- if it goes through as planned -- would create the world's second-largest IT and business services company, next to IBM. The combined services revenue for EDS and HP last year was $38 billion, compared with $54 billion for Big Blue.

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