Judge in Hewlett-Packard Trial to Rule As Early As Today
WILMINGTON, Del., Apr 30, 2002 (San Jose Mercury News - Knight Ridder/Tribune Business News via COMTEX) -- The judge in the Hewlett-Packard case is expected to rule as early as today on whether HP's shareholder vote to buy Compaq Computer should stand or be overturned.
In final arguments to the court, lawyers for Walter Hewlett, the dissident shareholder who has sued HP to stop the merger, said that the HP trial is a "case of facts versus spin."
"The stockholder vote on the merger was neither free nor fair," the Hewlett team stated in its final arguments, which were filed with the court Friday night but made public Monday. "The vote was tainted by misrepresentations and omissions as well as a misuse of corporate patronage and should be set aside by this court."
Hewlett, son of an HP co-founder and a former company director, fought a five-month battle to stop HP from buying Compaq. Two weeks ago, HP announced that a preliminary count showed that HP won the hotly contested vote by a narrow margin. Both sides are currently reviewing the ballots.
Ten days after the March 19 shareholder vote, Hewlett filed suit in Delaware's Chancery Court, which oversees corporate matters of the many companies incorporated in this small state.
Hewlett alleged that HP had mislead shareholders with overly optimistic projections for the merged company's revenues and cost-cutting, while internal reports showed top managers' concerns about meeting those goals.
In the trial that concluded last Thursday, HP executives said that the internal reports were snapshots of how the company was moving toward its goals and not indicative of a problem reaching the goal. Carly Fiorina, HP's chief executive, and Bob Wayman, HP's chief financial officer, said that they believed that the goals set were conservative -- and are still achievable.
In their brief, Hewlett's team said that the company should have told shareholders that managers were struggling to meet publicly stated financial goals for the new company. The "gap widened" over time between what HP top executives were saying about the merger's achievable goals and what the internal reports were showing.
"Where are the documents confirming the Fiorina/Wayman scenario? Where are the contrary reports and e-mails? Where are the documents validating any of these speculative synergies? Where are any of these documents?"
In his filing, Hewlett marshaled more details to support his second complaint that HP used the promise of future business to convince the large institutional shareholder Deutsche Bank to switch its votes at the last minute for the merger. During the trial, HP confirmed that it had a banking relationship with Deutsche that included hiring Deutsche to provide "market intelligence" during the proxy fight.
Deutsche officials, the filing claimed, put pressure on Deutsche's proxy team to vote for the merger out of concern for losing their "enormous" banking business with HP.
In its own closing argument filed over the weekend, HP dismissed Hewlett's case as circumstantial and said, "The time has come to force Walter Hewlett and his team to face reality. They lost."
Separately, an HP shareholder filed suit in Delaware's Chancery Court Friday, accusing Fiorina and Wayman of giving out misleading information about the merger's benefits and wasting more than $150 million in the proxy fight campaign. The suit, made public Monday, also accused Deutsche Bank officials of "aiding and abetting" Fiorina and Wayman.
Donna Schneider, the HP shareholder filing the suit, says that Deutsche gave in to "threats that Deutsche Bank would lose substantial future business from HP should Deutsche Bank not change its votes."
The suit asks that shareholders receive "damages in an amount sufficient to recompense them for defendants' actions in disenfranchising them." The suit also asks for shareholders to receive the money the company spent to win shareholder approval of the deal.
HP denied the allegations in the suit. "We believe the case is without merit and intend to defend it vigorously," said an HP spokeswoman.
By Michelle Quinn To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to bayarea.com
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