Walter Hewlett's Case May Be Difficult to Prove, Attorneys Say
By Cesca Antonelli
Wilmington, Delaware, April 6 (Bloomberg) -- Hewlett-Packard Co. director Walter Hewlett stands little chance of winning his lawsuit to block the computer maker from completing the $18.7 billion purchase of Compaq Computer Corp., lawyers said.
Judge William Chandler III of Delaware Chancery Court tomorrow will hear company arguments to throw out the suit, which accuses Hewlett-Packard of coercing investor Deutsche Bank AG into changing its vote on the deal. On March 19, Chief Executive Carly Fiorina said the purchase was approved by a slim majority.
Walter Hewlett had solicited proxies against the deal and outlined plans to replace Fiorina. While Chandler is unlikely to dismiss the suit tomorrow, Walter Hewlett has the difficult task of proving Deutsche gave in to pressure to vote for the combination, experts say. Hewlett also wants the court to toss out all other ``yes'' votes and block the company from issuing stock for the purchase.
``The chances of him being successful, even if these allegations are true, are relatively minor,'' said Chris Carson, a partner in the acquisition practice at law firm Cohen & Grigsby in Pittsburgh.
Investors are less certain. Compaq shares are trading about 11 percent below the value of Hewlett-Packard's offer, compared with 6 percent on March 20. The widening spread indicates that more investors think the deal may not go through. The trial will begin April 23.
Switch Sides
Hewlett-Packard shares fell 26 cents to $16.99 yesterday, while Compaq dropped 2 cents to $9.56.
Walter Hewlett and Fiorina declined to comment on the lawsuit. A Deutsche spokeswoman didn't return a phone call seeking comment.
Walter Hewlett claims Hewlett-Packard pressured Deutsche to switch sides at the last minute, leading the bank to change 17 million of its 25 million shares to support the purchase. Deutsche ``was led to understand'' that if it didn't change, it would jeopardize future business, Hewlett said.
He contends in complaint that on March 15, ``two business days before the H-P stockholder vote, H-P closed a new multibillion-dollar credit facility to which Deutsche had been added as a co-arranger.''
Official results of the shareholder vote may not be available for several weeks. Deutsche's stake in Hewlett-Packard is about 1 percent, and Walter Hewlett claims that Fiorina's margin is less than 1 percent of the shares cast.
Fine Line
``There's a fine line between management persuasion and coercion, and the question is, did management cross the line?'' said Charles Elson, who heads the corporate governance center at the University of Delaware.
Walter Hewlett has subpoenaed documents related to the bank and its relationship with Hewlett-Packard, the world's second- largest computer maker after International Business Machines Corp. His claims will be easiest to prove if there's something in writing to support them. Otherwise, he must ask Deutsche and see if officials deny it.
``If they have nothing, then they're out of luck,'' said Jesse Choper, a law professor at the University of California at Berkeley.
The most unusual aspect of Walter Hewlett's case is that he's relying on outsiders to prove his charges, without knowing for sure whether they'll side with him, professors and lawyers said. |
