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Thu, May 02, 2002 - Page 21 News List

Court clears way for H-P and Compaq

COMPUTER MERGER A US court ruled on Tuesday that there was no evidence CEOs at Hewlett-Packard pressured investors to vote for its merger with Compaq


A Delaware judge cleared Hewlett-Packard Co of allegations it acted improperly in the proxy fight over its acquisition of Compaq Computer Corp.

Former HP director Walter Hewlett, who had fought to stop the US$18.4 billion deal, said he would not appeal the ruling, which likely paves the way for completion of the high-tech industry's biggest merger.

"I will therefore now do everything possible to support the successful implementation of HP's acquisition of Compaq and encourage others who have shared my views in the past several months to do the same," the HP heir said in a statement Tuesday night.

Judge William B. Chandler ruled Tuesday that Hewlett failed to support his charges that HP bullied a big investor into supporting the acquisition and lied to investors about the progress of the merger plans.

"The evidence demonstrates that HP's statements concerning the merger were true, complete and made in good faith," wrote the Chancery Court judge, who presided over the three-day trial last week in Wilmington, Delaware.

Palo Alto-based HP and Houston-based Compaq have said they plan to begin working together May 7.

Chandler's ruling concluded another contentious chapter in Hewlett's fight to stop the acquisition. "Clearly we're gratified," HP spokeswoman Rebeca Robboy said. "We look forward to moving on."

After HP narrowly won its shareholder vote on the Compaq acquisition, Hewlett tried to block the deal by suing the computing giant, which his father, William Hewlett, co-founded in 1939. He sued in Delaware because HP is incorporated there.

That step so angered HP management and its other directors that Hewlett was not renominated for another term on the board, leaving the Silicon Valley institution without a Hewlett or Packard in its boardroom for the first time.

A preliminary tally released two weeks ago found that HP won the shareholder vote 51.4 percent to 48.6 percent. That amounted to a lead of 45 million shares -- likely enough to withstand the disqualification of the 17 million to 24 million shares voted by Deutsche Bank, the investor Hewlett claims was coerced.

The tally was being challenged by both sides but Hewlett said Tuesday night he would abandon that effort as well.

The trial in Delaware featured 10 hours of testimony from HP's top two executives, CEO Carly Fiorina and chief financial officer Robert Wayman.

Hewlett alleged that HP threatened to withhold future investment banking business from Deutsche Bank unless the investment firm canceled its vote against the deal and voted for it at the last minute.

In a voice mail for Wayman two nights before the March 19 shareholder vote, Fiorina suggested they do something "extraordinary" for Deutsche Bank.

Then in a conference call with Deutsche money managers about an hour before the shareholder vote began, Fiorina said their decision was "of great importance to our ongoing relationship."

Deutsche Bank was performing a variety of services for HP, including giving "market intelligence" advice for US$1 million, with a US$1 million bonus contingent on the deal's approval. Deutsche's top investment official was recorded saying the firm's vote on the HP-Compaq deal was highly sensitive and needed to be changed "as fast as humanly possible."

Fiorina and Wayman said they asked Deutsche money managers to support the deal on its merits and did not resort to coercive tactics.

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