Judge Dismisses Hewlett Suit Despite 'Concerns'

May 1, 2002 (PLANSPONSOR.com) - A Delaware judge has dismissed a lawsuit by dissident shareholder Walter Hewlett challenging Hewlett-Packard's acquisition of Compaq Computer - but noted concerns about some activities in the hotly contested vote.

Delaware Chancery Court Judge William B. Chandler III ruled that the plaintiffs ‘failed to prove that H-P management improperly enticed or coerced Deutsche Bank into voting in favor of the merger.’  He found that the evidence supporting Hewlett’s claim that HP had coerced votes from Deutsche Bank as ‘circumstantial.’  

During the trial, Hewlett’s attorneys had presented a voice-mail message from H-P Chief Executive Carly Fiorina where she spoke of taking ‘extraordinary’ action to persuade Deutsche to vote for the deal.

‘Clear Questions’

However, he also expressed concerns about potential conflicts of interest in the last-minute switch by Deutsche Bank in its vote – following a March 19 conference call set up by Deutsche’s commercial-banking group.  That call, in which HP made a final pitch, ‘raises clear questions about the integrity of the internal ethical wall that purportedly separates Deutsche Bank’s asset management division from its commercial division,’ according to the 45-page opinion.  The judge was also concerned that individuals from the commercial banking group sat in on the call.
 
The decision removes one of the last hurdles blocking H-P’s acquisition of Compaq. Hewlett, son of an HP co-founder, was a Hewlett-Packard director for 15 years until last week, after waging a bitter battle contesting the Compaq acquisition. 

Last Minute Switch

After the March 19 vote, Hewlett brought suit alleging that Deutsche Asset Management (DAM) originally planned to vote more than 25 million shares against the deal, but at the last minute changed its mind, voting as many as 17 million shares for the deal. The reason, according to Hewlett’s suit: It feared losing future business from H-P.

After a month of counting votes, the preliminary count shows Hewlett-Packard (H-P) prevailing in its proposed acquisition of Compaq Computer – but by a razor-thin margin of some 51.4% of the shares voted.

Moving On

Hewlett could, of course, still file an appeal contesting the judge’s dismissal with the Delaware Supreme Court.    However, Tuesday evening Hewlett seemed willing to at last set his battle aside.  ‘After reviewing the Court’s opinion, we have decided not to appeal the decision to the Supreme Court of Delaware,” he said. “Additionally, we have decided to discontinue the review and challenge period of the preliminary vote count and permit the vote to be certified.”

Hewlett said that while he had disagreed with the rest of the HP board over the merits of the merger deal, he would also work now to make it a success – and encourage those who had shared his view over the past several months to do the same.

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