Hewlett v. Hewlett-Packard Co.
Delaware Court of Chancery
2002 WL 818091
Hewlett-Packard (HP) (defendant) entered a merger agreement with Compaq in 2001, projecting significant synergy savings based on conservative estimates, and scheduled a shareholder vote for March 2002. The Hewlett Parties (plaintiffs), opposing the merger, launched a proxy fight; over the following months, HP made public statements reflecting genuine confidence in the merger, even after early 2002 internal data suggested the original projections might have been overly optimistic, information HP didn't disclose before the vote. As the vote approached and appeared close, HP's CEO met with Deutsche Bank (a major shareholder planning to vote against the merger), reiterated her enthusiasm for the deal, and made a remark the Hewlett Parties interpreted as an implicit threat to cut business ties if Deutsche Bank voted against the merger; Deutsche Bank then reversed course and supported the merger, which passed by a slim margin. The Hewlett Parties sued, alleging fraudulent nondisclosure of negative projections and improper vote-buying.
Whether a shareholder vote on a merger may be invalidated for inadequate disclosures or vote-buying, absent proof that corporate management knowingly and intentionally misrepresented material facts or that a threat of lost business actually caused a shareholder to change its vote.