Sircam merger vote legal – Judge

Blasts the bankers

In a clear victory for Carly Fiorina, Judge Chandler has rejected Walter B Hewlett's case that the Sircam merger shareholder vote was improperly conducted.

"Nothing in the record indicates that HP lied to or deliberately misled" shareholders, said the Judge.

Hewlett Jr alleged that HP management failed to disclose facts about the integration of HP and Compaq, and that it "improperly coerced and enticed" Deutsche Bank into voting for the merger.

He accepted HP's defense that discrepancies in cost saving estimates from the 23 integration teams and the bottom-up teams could be legitimately explained.

"HP's explanation of the gaps between the bottom-up and top-down numbers is compelling," concluded the judge.

When Compaq CFO Jeff Clarke emailed Capellas "it is ugly - both companies are deteriorating" on March 12, he was merely expressing frustration that the business groups weren't heeding management suggestions of potential savings.

"Troubling"
However the Judge was disturbed by the behavior of Deutsche Bank, which changed its mind after an intervention from the HP CEO.

On March 15, decided to vote Compaq shares in favor of the merger, and HP against - from which you can deduce that it thought the merger was good for Compaq, but bad for HP.

The ensuing panic at HP produced a memorable example of life imitating satire, when a voice mail to Fiorina was leaked to the San Jose Mercury. (Our name for the merger springs from a piece of whimsy in which we suggest that the two CEOs got together completely by accident).

After a conference call, Deutsche Bank swung its HP shares vote in favor of the merger. But Fiorina and Hayward persuaded them "entirely on the merits", according to Chandler.

But the Judge said he found the relationship between Deutsche Bank's commercial banking arm and its investment arm to be "troubling": banking staff initiated the March 19 conference call, and sat in on it too. This "internal ethical wall that purportedly separates DB's asset management division from its commercial division.

Now the 150-strong executive team can get on with the urgent business at hand: laying off thousands of people. ®

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