H-P Trial Kicks off in Delaware

Chancellor William Chandler is expected to hear opening arguments in a non-jury trial in the challenge to the $19 billion deal by dissident H-P director Walter Hewlett. Proceedings are expected to last about three days, according to an Associated Press report.

In a lawsuit against the company, Hewlett alleged that H-P was only able to win its March 19 shareholder vote by threatening one big investor, Deutsche Bank, that it would withhold its business.

H-P executives also hid unflattering information about H-P and Compaq’s ability to carry out the merger, the lawsuit alleged.

Hewlett first fought the deal on the grounds that buying Compaq was too risky and would bog H-P down in the weak personal-computer market at the expense of its profitable printing division. 

H-P Execs Testify

H-P executives are expected to testify, but it’s unclear whether chairwoman and chief executive Carly Fiorina will be among them.

Fiorina gave a deposition in the case, as did other top brass from H-P, Deutsche Bank, Goldman Sachs, H-P’s banker on the deal, and the firms that advised Walter Hewlett.

A preliminary tally by an independent proxy certifying firm found that 51.4% of H-P shares were voted for the Compaq deal, and 48.6% came out against. With more than 1.6 billion shares voted, H-P beat Hewlett by 45 million shares.

Hewlett believes Deutsche Asset Management originally voted 25 million H-P shares against the deal but switched 17 million just before the shareholder meeting, which came days after Deutsche Bank helped arrange a $4 billion credit facility for H-P.

Hewlett-Packard has denied wrongdoing, and Deutsche Asset Management has said it merely voted the shares it controlled in the best interests of its investment clients.

Hewlett asked Chandler to negate the vote either by voiding certain investors’ shares or by determining that H-P corrupted the entire process by buying votes.