Hewlett-Packard believed that Deutsche Bank was a "close friend" of
the company and supportive of its merger with Compaq right from the
beginning, according to HP's chief financial officer, Robert
Wayman.
Wayman said in court yesterday that when the merger was announced
on 4 September, Deutsche Bank's chief HP analyst began to back the
deal. Bank officials then contacted Wayman and other HP officials
to see if the bank could help ensure the success of the merger.
He added that bank officials told him that Deutsche Bank had helped
AT&T in its proxy fight and that it could do the same for HP.
The two sides then negotiated throughout the autumn and winter
until they signed a contract in February.
The terms of the contract stated that Deutsche Bank would be paid
$1m (£688,318) to help HP get shareholders to support the merger.
If Deutsche Bank was successful, Wayman testified, it would be paid
an additional $1m.
In his suit to stop HP's merger with Compaq, dissident director
Walter Hewlett alleges that HP coerced Deutsche Bank officials to
switch 17 million votes in favour of the merger in exchange for
HP's making the bank the co-arranger in a multibillion-dollar line
of credit. Both HP and Deutsche Bank deny the charge.
Wayman said he was shocked and angry to find out days before the
proxy vote that Deutsche Bank did not plan to back the merger. He
called the two men with whom he had negotiated the original deal
and was told that the bank would back the merger. He said later
that he kept hearing rumours that the bank was voting against the
merger and he called again.
"This vote will be close, and it is really important that you check
with your folks and find out where they are going to vote," Wayman
claimed he told the bank officials.
"Is it fair to say you got agitated with them?" Walter Hewlett's
attorney, Stephen Neal, asked.
"Agitated and frustrated," Wayman responded, adding that he quickly
put his anger aside and concentrated on getting a chance to make a
pitch to the bank's asset managers.
Wayman said HP had not presented a case to Deutsche Bank because he
had always assumed that the bank was in favour of the merger, since
the analyst had been so positive and the bank had solicited HP's
business.
Meanwhile, both Wayman and HP chief executive officer and
chairwoman Carly Fiorina continued to paint a picture of a middle
management staff that was overly negative and not entirely up to
date on what was happening in the merger process.
Fiorina and Wayman rejected a series of reports by those middle
managers that indicated that the combined company would not be able
to meet financial expectations.
Wayman, like Fiorina before him, painted HP managers as not being
connected to the big picture of the merger and being too swayed by
negative economic information regarding the country at large. Both
claimed they could see broader trends that were not apparent to
middle managers.
Fiorina added that those managers also did not have all the
documents related to the merger. The two companies had set up a
"clean team" that had all the company documents, while most middle
managers did not. If the merger failed to win antitrust approval,
those managers would have the corporate secrets of a competitor.
For that reason, the number of people with total access to the
documents was kept low.
When the reports in question were created, many of the middle
managers who authored them had only recently been given greater
access. In some cases, Wayman said, the managers of the new
business units were made up of both Compaq and HP employees who had
just met each other for the first time.
Coupled with that, Fiorina added, the general economic climate in
the country was poor, and the managers' opinions for the future of
the combined HP/Compaq reflected that view.