SAN JOSE — A judge in Delaware has left open the possibility that dissident Hewlett-Packard Co. director Walter Hewlett still can torpedo the company’s $19 billion acquisition of Compaq Computer Corp.
Chancery Court Judge William B. Chandler III ruled Monday afternoon that there is merit to Hewlett’s lawsuit accusing HP of improperly enticing a big investor to back the deal and making false statements about the progress of the complex merger plans.
The case is set for trial April 23, even as an independent proxy firm continues to count the ballots from last month’s shareholder vote — and both companies press ahead with their integration plans in hopes of closing the deal late this month or in early May. HP believes it won the vote by a “slim but sufficient” margin.
HP attorneys had asked in an unusual Sunday morning hearing that Hewlett’s suit be thrown out, saying in part that the heart of what he alleges is not illegal even if it did happen.
The company said Monday it respected Chandler’s decision, but remained confident that “once the facts are heard, we will prevail. ... We remain optimistic we will be able to complete the merger on our current schedule.”
Hewlett contends that HP’s edge of less than 1 percent of its 2 billion shares would have vanished if not for a late switch in position by the investment arm of Deutsche Bank, one of the company’s biggest stockholders. HP had opened up a line of credit with Deutsche Bank just days before the vote, and Hewlett believes the company threatened to take future business away.
The judge said Hewlett will have the significant burden of showing that Deutsche Bank was actively coerced by HP management into voting for the merger.
Hewlett also claimed that HP made misleading statements during the proxy fight about the progress of the Compaq integration plans and the new company’s ability to hit its stated cost-cutting targets.
Without ruling on that claim, Chandler did note that a company cannot give out false information that is material to stockholders and then “obtain protection by describing that lie as a forward-looking statement.”
Hewlett, a son of an HP co-founder, frustrated the company with his vigorous five-month fight against the Compaq deal and was not renominated for another term on the board after he filed his lawsuit March 28.
Hewlett’s advisers released a statement saying the family trust he represents was pleased with the judge’s decision and grateful he took up the issue so quickly.
HP shares rose 29 cents to close at $17.41 in trading Tuesday on the New York Stock Exchange, where Compaq shares fell 31 cents, to $9.28.
Despite the decision to let Hewlett’s case continue, the companies did have some positive news. Compaq said it would meet or beat Wall Street forecasts for its first fiscal quarter when results are announced April 18.
The Houston-based company said revenue would be about $7.7 billion, slightly ahead of analysts’ current forecast of $7.6 billion, according to Thomson Financial/First Call.
On the Net:
Hewlett’s opposition site: http://www.votenohpcompaq.com