2 April 2002 Hewlett-Packard (HP) yesterday withdrew its peace offer to Walter Hewlett, reversing a plan to renominate the dissident director and heralding the first HP board without a representative from either of the founding families.
The system vendor’s move is a response to Hewlett’s lawsuit last week claiming that HP fixed the crucial Compaq Computer merger vote by “improperly” influencing the decision of one of the company’s biggest institutional shareholders, Deutsche Asset Management.
Before the lawsuit was filed on 28 March, HP said it was prepared to offer Hewlett an olive branch after his bitter opposition to the company’s planned takeover of rival Compaq seemed to have ended in failure.
After HP CEO Carly Fiorina claimed a “slim but sufficient” margin of victory in the fight for shareholder approval – the official results are not yet known – board members met with Hewlett “to develop a constructive working relationship”, HP said, voting unanimously to renominate him on 27 March.
“My fellow board members and I were … shocked when just hours later Walter Hewlett filed a spurious lawsuit against the company,” Sam Ginn, chairman of HP’s nominating and governance committee, told the Associated Press news agency.
In a statement yesterday, Hewlett said the board’s move was “unfortunate”. “Dissent is not disloyalty. Healthy boards need not agree on every issue,” he said.
The circumstances surrounding Deutsche Asset Management’s surprise decision to switch most of its 25 million shares in favour of the deal will now decide the fate not only of Hewlett but of HP’s senior executives.
What is known is that in the days leading up the 19 March vote, the investment arm of Deutsche Bank said it intended to vote against the merger. It then switched most of its 25 million shares on the morning of the poll. That same day, HP closed a $4 billion (€4.6bn) revolving credit facility, naming Deutsche Bank as a co-arranger.
Deutsche Asset Management refused to comment. Michael Philipp, Deutsche Bank’s global head of asset management, retired last week.
Hewlett’s lawsuit alleges that HP used “corporate assets” and the promise of future business deals to coerce Deutsche Asset Management into switching some of its shares.
It also claims that HP “engaged in a series of deceptions” about its integration plans with Compaq. It alleges that HP and Compaq will have to lay off 24,000 workers, rather than the stated 15,000. It also claims that the two companies’ special integration team knows it will miss its financial projections.
Yesterday, HP asked a judge in the Delaware Chancery Court to throw out the lawsuit. The company’s filing says there is no legal basis to throw out the results of the shareholder vote.