Key HP Shareholder Was Also Merger Advisor
Apr 24, 2002 (ComputerWire via COMTEX) -- Lawyers for dissident Hewlett-Packard
Co director Walter Hewlett argued in court yesterday that a key shareholder vote
was bought by the promise of big consulting fees if HP's merger with Compaq
Computer Corp was approved.
In an eventful first day of the HP-Compaq merger trial, it emerged that Deutsche
Bank AG, the shareholder whose votes are being challenged in the trial, had been
hired as an advisor to the deal in January, four months after the merger was
announced.
Hewlett's attorney Stephen Neal said the bank stood to gain a $1m bonus and
future banking business if the merger was passed, according to reports out of
the courtroom yesterday. Neal said CFO Bob Wayman made the deal without the
participation of CEO Carly Fiorina.
Deutsche Bank denies that its banking relationship with HP has anything to do
with how its Deutsche Asset Management unit voted in the March 19 poll. The
company, which is believed to own about 25 million HP shares, said that it voted
according to the best interests of its investment clients.
According to people quoted by the Associated Press, Deutsche Asset Management
voted 17 million shares in favor of the merger - all the shares it was permitted
to under its arrangements with clients. Had these shares been voted against the
deal, shares voted for it would have represented 50.3% of the total, rather than
the 51.4% in the current tally.
It also emerged that HP knew before the shareholder vote that the potential
financial benefits of the merger were not as good as it disclosed to
shareholders in Securities and Exchange Commission filings.
Neal presented an email from an HP finance executive to CFO Wayman, along with
an attached internal report on the financial benefits of the merger. The email
read: "The attached is a frightening reality check... I see little realistic
upside and I am not alone. I sincerely hope we all start acknowledging the
realities soon."
HP knew in March that original projections of the benefits the integration of
the two companies would bring were up to 25% too high, according to Walter
Hewlett's attorneys.
CEO Fiorina, who testified yesterday afternoon, said the original estimates were
best guesses at the time, and that it would have been "irresponsible" to show
the updated numbers to shareholders.
When asked about the voicemail leaked to the press recently, in which she told
Wayman they might have to do something "extraordinary" to secure the Deutsche
Bank vote, Fiorina replied: "I wasn't sure precisely, but I was trying to convey
a sense of urgency and a sense of priority," according to Reuters.
HP, which denies any wrongdoing, has yet to present its defense in the trial,
which is expected to conclude this week. Hewlett, who has fought the merger
since the outset, wants to invalidate the merger vote by throwing out contested
votes, or by having the court rule that HP acted improperly in securing votes.
Computergram International: Issue 4402, April 24, 2002 |
