Court Clears HP/Compaq Merger

A Delaware judge has dismissed a lawsuit that alleges that Hewlett-Packard (HP) officials acted improperly to gain shareholder votes for the company's proposed merger with Compaq. The decision clears the way for HP's $18 billion purchase of Compaq, the largest corporate consolidation in PC-industry history. Walter Hewlett, a recently ousted HP board member who filed the lawsuit, says he won't appeal the ruling and will instead support the acquisition.

"Members of HP's senior management testified credibly, in accordance with the evidence and without exception," Delaware Chancery Court Judge William Chandler wrote in his ruling. Chandler said that Hewlett failed to meet the burden of proof in his lawsuit, in which he alleged that HP lied to shareholders to gain approval for the Compaq purchase. "Plaintiffs have failed to prove that HP management improperly enticed or coerced Deutsche Bank into voting in favor of the merger," Judge Chandler wrote, "[and] nothing in the record indicates that HP lied to or deliberately misled [shareholder adviser Institutional Shareholder Services] or the HP shareholders about its integration efforts."

HP plans to merge the two companies May 7. Ironically, Hewlett's tenacious legal battles might ultimately help make the complicated merger a success because it forced HP executives to plan each step of the merger down to the last detail. About 15,000 workers--10 percent of the new company's workforce--will lose their jobs.