30/3/02 FT on Hewlett Suit
by: skeptically 03/30/02 01:26 am
Msg: 115827 of 115838
globalarchive.ft.com lett+packard
COMPANIES & FINANCE: Hewlett suit means the HP merger could face delay
Financial Times; Mar 30, 2002
By LOUISE KEHOE
Hewlett-Packard faces possible delays and further uncertainties relating to its planned Dollars 19bn acquisition of Compaq Computer, following a legal challenge filed by Walter Hewlett, the dissident HP board member, on Thursday.
Mr Hewlett, who has waged an aggressive proxy fight against the transaction over the past five months, charged in his lawsuit that HP obtained a significant number of shareholder votes in favour of the deal by "improper means" and that it "engaged in a series of deceptions" about its integration plans.
The complaint calls on the Delaware Chancery Court to invalidate the proxies voted in favour of the merger. It also seeks a preliminary injunction to prevent HP from closing the merger.
Following the vote on March 19, Carly Fiorina, HP chairman and chief executive, declared victory saying that the company had obtained a "slim but sufficient" majority, based on its preliminary count.
She acknowledged, however, that it might be two to four weeks before an official tally of the votes. Any further delay could have severe negative effects for HP, prolonging the period of uncertainty among customers, employees and Wall Street analysts.
In particular, customers are anxious to hear details of HP's "product road map" in which the company will lay out how it plans to combine product lines of HP and Compaq and specify which products are to be discontinued.
In the meantime, HP's sales are likely to suffer, industry analysts say.
HP and Compaq employees also have the morale-sapping prospect of 15,000 job losses hanging over their heads. The sooner these cuts are made, the sooner the two companies' workforces can begin to coalesce.
HP and Compaq have already been forced to abandon their original schedule for integrating operations. Last month Ms Fiorina told the Financial Times: "Everything is geared towards hitting the ground on April 1." With the companies forced to wait for the official outcome of the vote, they said this week that they hoped to close the deal "in the April-May time-frame".
"Putting anything on hold while we wait for a final proxy vote tabulation is simply not an option," wrote Ms Fiorina and Michael Capellas, her counterpart at Compaq, in a letter to employees that emphasised the urgency of moving forward with integration plans.
Now Mr Hewlett's lawsuit raises the possibility of even further delays. If he wins his lawsuit, the deal would have to be put to another shareholder vote - which could take a month or longer to organise.
Alternatively, if the court grants a preliminary injunction, the merger could be put on hold pending the outcome of the legal proceedings.
The Delaware court, which is geared to business disputes, is known for its rapid handling of cases but Mr Hewlett's lawsuit raises issues that could require numerous executives and employees from HP, institutional investors, the proxy solicitors and others to provide depositions, lengthening the proceedings.
HP is expected to seek immediate dismissal of the case.
On Thursday the company said it believed the suit was completely without merit and vowed to vigorously defend itself.
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