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Hewlett v. Hewlett-Packard Co.

Delaware Court of Chancery
2002 WL 818091


In September 2001, Hewlett Packard Co. (HP) (defendant) entered into a merger agreement with Compaq Computer Corporation (Compaq). Based on conservative projections, HP’s management estimated that the merger would generate significant savings through synergies while causing relatively small revenue loss. The two companies began a thorough process of planning for integration. A special shareholder meeting to consider and vote on the merger was scheduled for March 19, 2002. In November 2001, Walter Hewlett, Edwin von Bronkhorst, and the William R. Hewlett Revocable Trust (the Hewlett Parties) (plaintiffs) announced that they opposed the merger and launched a proxy fight. Over the next few months, HP’s management made a number of public statements and filings reflecting their confidence that the merger would create value for shareholders. In January 2002, one advisor and several data points suggested that the original projections were overly optimistic. HP did not make this information public prior to the shareholder vote. By March 2002 it was clear that the shareholder vote would be close. Deutsche Bank, a holder of a significant number of shares, announced it would vote against the merger. HP’s management sought and obtained a meeting with the Deutsche Bank investment group. HP’s CEO made a presentation in which she reiterated HP’s enthusiasm about the merger and pleaded for Deutsche Bank to reconsider. She commented that Deutsche Bank’s vote was a significant moment in Deutsche Bank’s relationship with HP. Deutsche Bank performed work for HP in other capacities, and the Hewlett Parties interpreted the remark as threatening to cut business ties with Deutsche Bank if the company voted its shares against the merger. The Hewlett Parties also spoke at the meeting, arguing against the merger. Deutsche Bank changed course and decided to support the merger. At the shareholders meeting, the merger was approved by a slim margin. The Hewlett Parties sued HP, alleging that the company had fraudulently failed to release negative projections about the merger, and that they had improperly bought the vote of Deutsche Bank’s shares.

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Holding and Reasoning (Chandler, J.)

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  • A “yes” or “no” answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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