The OEM failed to win approval at court for its settlement with shareholders regarding the acquisition of Autonomy.
SFGate reported on how the OEM has “failed again” to win court approval for a settlement with its shareholders concerning the acquisition of UK software company Autonomy. The OEM’s writedown of Autonomy’s worth in November 2012 came one year after it purchased the company, claiming that “accounting fraud and inflated financials” from Autonomy officials, including CEO Mike Lynch, were to blame, and HP’s shareholders had sued the company for mismanagement, though a settlement was announced in June this year.
US District Judge Charles Breyer’s assessment of HP and its shareholders’ deal to settle stated in September that the settlement “release[s] Hewlett-Packard executives from liability” over its “botched acquisition” of Autonomy a few years ago.
However, the hearing on 26 September in San Francisco’s Federal Court saw Breyer “sharply question” the details of the settlement agreement, which at this time appears to “release” executives at HP “from liability” over the acquisition of Autonomy. Breyer asked in court “whether HP officials, including Chief Executive Meg Whitman, were getting too broad of a pass from potential shareholder claims related to their leadership”.
He added that the release “appears to be staggering in its breadth”, and had “not yet decided” whether to reject the deal or not, noting that “the question I have to determine is whether [it’s] fair” that the settlement “could absolve HP executives from shareholder liability on subjects beyond the Autonomy deal”.
Breyer has now said that the agreement “would provide little for investors while protecting executives from blame”, noting that he was concerned that the agreement “was too weighted on the side of shielding company executives” as well as potentially “depriv[ing] investors of their right to sue management over matters unrelated to the write-down”, with part of the settlement releasing executives from a “staggering” scope of potential lawsuits.
Breyer stated that “the shareholders appear to be relinquishing a whole universe of potential claims regarding HP governance and practices with no factual predicates that overlap the Autonomy acquisition — the subject of this litigation”, criticising the OEM and shareholder lawyers for “abdication of their responsibility”.
Erik Gordon, Law Professor at the University of Michigan’s Ross School of Business, also commented: “When a judge takes you to the woodshed to explain that he or she finds your conduct unacceptable, you are well-advised to listen. HP management’s attempts to protect themselves against their stockholders who were hurt by their handling of the Autonomy deal do as much to make management look bad as the deal, itself, did.”