HP accused of concealing data on Compaq merger
WILMINGTON, DE, Apr 23, 2002 (AFX-Europe via COMTEX) -- WILMINGTON, DE (AFX) -
Hewlett-Packard Co executives allegedly concealed key financial data about the
planned merger with Compaq Computer Corp and offered unusual inducements to win
over big institutions ahead of a shareholder vote, lawyer Stephen Neal said in a
hearing.
Neal represents HP family heir Walter Hewlett in the suit in Chancery Court here
that seeks to invalidate the March 19 vote by HP shareholders approving the
merger.
However, HP attorney Steven Schatz countered there was no basis to throw out the
shareholder vote and said the opponents of the deal have "dragged Hewlett
Packard officers and board through the mud on speculation."
Judge William Chandler opened the hearing, expected to last three days, in the
presence of HP chief executive Carly Fiorina and Hewlett, her main adversary in
the case who has led shareholders opposed to the merger.
In his opening statement, Neal said HP and Compaq executive councils were fully
informed about projections for revenues and earnings of a combined HP-Compaq but
nonetheless gave shareholders more optimistic forecasts.
"None of this was disclosed to shareholders," Neal said. "That in itself should
cause this vote to be thrown out."
Neal said evidence to be presented at the case would show a "carrot" offered to
Deutsche Bank in the form of increased business if it voted its shares for the
merger.
The evidence of HP irregularities in influencing Deutsche Bank is
"circumstantial, but it is powerful," Neal told the judge.
Among other inducements to be disclosed in court, Neal said, Deutsche Bank was
promised a 1 mln usd bonus from HP if the merger won approval.
Schatz, in his opening statement, argued the whole controversy was simply about
"a hard fought merger contest" and maintained that "evidence will show that HP
management acted totally properly."
In the lawsuit, which could delay and even end the merger, Hewlett claims
Fiorina coerced Deutsche Bank, a major company shareholder, to change its
millions of votes to favor the merger.
Part of that enticement, Hewlett alleged, was the recent establishment of a
multimillion-dollar credit that benefited Deutsche Bank.
Fiorina contends the deal -- valued at some 20 bln usd -- is essential for HP's
future in a dwindling technology landscape dominated by giants likes Microsoft
and IBM.
Hewlett -- a son of one of HP's founders -- has bitterly opposed the acquisition
of Compaq, saying it ties HP too closely to the slumping computer manufacturing
sector.
A preliminary vote count by an independent firm showed that 837.9 mln shares
were cast in favor of the merger at the March 19 vote, with 792.6 mln against.
Votes were counted by IVS Associates, a Delaware corporate balloting company.
Hewlett said the court case "must be heard before any final outcome is
determined."
HP has also received a request for documents from federal prosecutors and the
Securities and Exchange Commission on the shareholder vote process.
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Copyright 2002. AFX News Ltd. All rights reserved.
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KEYWORD: United States of America
INDUSTRY KEYWORD: Computers, Electronics, Avionics
SUBJECT CODE: Mergers and Acquisitions
General News
Government Regulatory Actions
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