Court Won't Block HP Merger
Hewlett Heir Rules Out Appeal, Vows to Support Compaq Deal

By Mike Musgrove
Washington Post Staff Writer
Wednesday, May 1, 2002; Page E01

A Delaware judge yesterday let stand a vote by Hewlett-Packard Co. shareholders that approved the purchase of Compaq Computer Corp., clearing the way for the $25 billion merger.

Walter Hewlett, son of one of the co-founders of Hewlett-Packard, who led a proxy fight to prevent the merger, said in a statement last night that he would not appeal the ruling, the Associated Press reported. "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.

During a three-day trial that ended on Friday, Hewlett accused the company of misleading shareholders and improperly influencing the investment firm Deutsche Bank to vote for the deal.

In his opinion, Chancery Court Judge William B. Chandler III dismissed most of Hewlett's claims.

"The plaintiffs have been unable to prove that HP misrepresented or omitted material facts about integration in the proxy contest," Chandler wrote. "Instead the evidence demonstrates that HP's statements concerning the merger were true, complete, and made in good faith."

HP officials applauded the decision. "We're gratified by the ruling, and we look forward to the opportunity to move on," said Rebecca Robboy, an HP spokeswoman.

The lawsuit so angered company executives that they moved to not renominate Hewlett as a director, leaving the company without Hewlett or Packard family members on its board for the first time.

Hewlett claimed in his lawsuit that HP threatened to withhold future investment banking business from Deutsche Bank unless the firm voted for the deal. He based his allegation in part on a transcript of a conference call in which HP chief executive Carly Fiorina told Deutsche money managers that the decision was "of great importance to our ongoing relationship."

Deutsche Bank switched 17 million shares at the last minute in favor of the merger, but it appears now that would not have been sufficient to alter the outcome of the March 19 vote. According to a preliminary estimate, stockholders approved the merger by a margin of 45 million votes, or 51.4 percent to 48.6 percent.

HP believes that it has won the approval of shareholders and plans to proceed with the merger, though it has not yet received certified results.

"We have been an opponent of the deal, but at this point it looks like the deal happening is a fait accompli," said David Katz, president of Matrix Asset Advisors. "We think at this point the decision should stand and Hewlett-Packard should get on with business."

Fiorina has announced that she hopes to launch the newly merged company on May 7.