April 30, 2002 7:20 PM PDT

Hewlett abandons merger challenge

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Walter Hewlett on Tuesday abandoned his challenge to Hewlett-Packard's merger with Compaq Computer, saying he would not further contest the outcome of a March 19 shareholder vote.

See special coverage: A Fight to the Finish The decision came hours after a Delaware judge dismissed his lawsuit that sought to overturn the vote. Hewlett had also been pursuing a challenge and recount of the vote.

"After reviewing the Court's opinion, we have decided not to appeal the decision to the Supreme Court of Delaware," Hewlett said in a statement. "Additionally, we have decided to discontinue the review and challenge period of the preliminary vote count and permit the vote to be certified."

Hewlett's decision effectively removes the last hurdle to closing the $19 billion merger with Compaq. HP Chief Executive Carly Fiorina has said the company aims to close the deal May 7.

Hewlett said that although he disagreed with the merits of acquiring Compaq, that he will 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 move ends Hewlett's battle to defeat the deal, which began last November.

Hewlett, who initially voted in favor of the deal as a director, said on Nov. 6 that he planned to vote the family's stake against the deal. He was joined a day later by David W. Packard, son of HP's other founder, and later by the David and Lucile Packard Foundation, HP's largest shareholder.

Combined, the families' stake amounted to roughly 18 percent of HP shares and forged a formidable opposition to the deal.

Momentum seemed to be against the deal through early this year, but the tide started to turn in March, when key adviser, Institutional Shareholder Services, recommended that its large investor clients approve the deal.

The battle became a costly and an ugly one, with both sides battling for every vote. In the days leading up to the March 19 meeting, both sides lined up an array of public support from pension funds and other large shareholders.

The shareholder meeting was packed with Hewlett supporters, although Fiorina declared victory hours after the meeting ended. Hewlett declared the race too close to call.

A little more than a week later, Hewlett filed his lawsuit in Delaware Chancery Court, alleging that HP essentially bought the vote of Deutsche Bank and also that the company failed to disclose problems that were encountered during its integration planning process.

After Hewlett's lawsuit, HP said it would not renominate Hewlett to the board, marking the first time that neither a Hewlett nor a Packard would be represented.

Although Hewlett was not renominated to HP's board, he vowed to stay involved with the company his father founded. "As Chairman of The William and Flora Hewlett Foundation and as a trustee of The William R. Hewlett Revocable Trust, I represent two major stockholders, and I will continue to monitor the company's performance to ensure that it acts in the best interests of all stockholders," Hewlett said.

 

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