SAN JOSE, Calif. — A Delaware judge Tuesday cleared Hewlett-Packard Co. of allegations it acted improperly in the vicious proxy fight over the Compaq Computer Corp. acquisition, likely paving the way for completion of the high-tech industry’s biggest merger.
After a three-day trial last week in Wilmington, Del., Chancery Court Judge William B. Chandler ruled that former HP director Walter Hewlett failed to support his charges that HP bullied a big investor into supporting the Compaq deal 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,” Chandler wrote.
Hewlett can challenge the ruling in the Delaware Supreme Court. The HP heir said in a statement he was disappointed with the decision but planned to review it closely before deciding on his next step.
Palo Alto-based HP and Houston-based Compaq plan to begin working together May 7.
“Clearly we’re gratified,” HP spokeswoman Rebeca Robboy said. “We look forward to moving on.”
Chandler’s ruling concluded another contentious chapter in Hewlett’s fight to stop the $18.4 billion acquisition.
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, as are many Fortune 500 companies.
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.
Hewlett’s statement said he would maintain his involvement with the company and monitor it “to ensure that it acts in the best interests of all stockholders.”
The Securities and Exchange Commission and federal prosecutors in New York also have been looking into how HP acted in the proxy fight.
“This has been an astonishing sequence of events,” said Gartner Inc. analyst Martin Reynolds. Because of all the scrutiny on the deal since it was announced Sept. 3, “I really believe this is one of the best planned mergers we’ve ever seen,” Reynolds added.
A preliminary tally released two weeks ago found that HP won its shareholder vote 51.4 percent to 48.6 percent. That amounted to a lead of 45 million shares — likely enough even if the judge had disqualified the 17 million to 24 million shares voted by Deutsche Bank, the investor Hewlett claims was coerced.
The tally is not yet official because both sides are challenging individual ballots, a process known as “the snake pit.”
The Delaware trial 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.” Hewlett attorneys also said HP’s proxy solicitor had noted on a planning chart that HP had a “carrot of future business” to use in lobbying Deutsche Bank.