Final chapter opening in heir's bid to scuttle $19 billion HP-Compaq deal

Tuesday, April 23rd 2002, 12:00 am
By: News On 6

WILMINGTON, Del. (AP) _ More than seven months after Hewlett-Packard Co. announced plans to buy Compaq Computer Corp., a judge will decide what could be dissident HP director Walter Hewlett's final bid to scuttle the $19 billion deal.

Hewlett first fought the deal on the grounds that buying Compaq was too risky and would bog HP down in the weak personal-computer market at the expense of its profitable printing division.

Now, in a lawsuit against the company, Hewlett contends HP won its apparent slim majority in the March 19 shareholder vote by threatening to take business away from at least one big investor, Deutsche Bank, and by hiding unflattering information about HP and Compaq's ability to carry out the merger as well as hoped.

Opening arguments were scheduled Tuesday in Delaware Chancery Court in Wilmington, which has jurisdiction over the governance of companies such as HP that are incorporated in the state. The trial, being heard by one of the court's expert business judges and not by a jury, is expected to last three days.

HP executives are expected to testify, but it is unclear whether CEO and chairwoman Carly Fiorina will be among them.

``We welcome the opportunity to present our case in front of the chancellor and have the facts come to light,'' HP said in a statement Monday. ``We believe when the evidence is heard, it will be clear that HP acted properly in all cases.''

A Hewlett spokesman did not return a call seeking comment.

Official certification of HP's apparent approval of the deal is expected within days.

A preliminary tally released last week by an independent proxy certifying firm found that 51.4 percent of HP shares were voted for the Compaq deal, and 48.6 percent came out against. With more than 1.6 billion shares voted, HP beat Hewlett by 45 million shares.

Hewlett hopes Chancellor William Chandler III negates the vote either by voiding certain investors' shares or by determining that HP bought votes and corrupted the process.

Hewlett believes Deutsche Asset Management originally voted 25 million HP shares against the deal but switched 17 million just before the shareholder meeting, which came days after Deutsche Bank helped arrange a $4 billion credit facility for HP.

Hewlett-Packard has denied wrongdoing, and Deutsche Asset Management has said it merely voted the shares it controlled in the best interests of its investment clients.