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There is no reason for management to disclose preliminary reports that are generated early in a planning process, based, on imperfect information, and limited both by the unfamiliarity of the people creating the report with the business and by the desire of those people to commit to conservative numbers that are definitely attainable.
Hewlett-Packard Company ("HP") and Compaq Computer Corporation were publicly traded global providers of computers and computer-related products and services. HP’s shareholders approved the issuance of shares in connection with the merger of the two companies. Subsequently, William R. Hewlett and plaintiff Edwin E. van Bronkhorst (collectively, the “Hewlett parties”) filed the present action pursuant to 8 Del. C. § 225(b) challenging the validity of the HP shareholders’ vote. The Hewlett Parties attacked the vote on two grounds: first, they asserted that HP management knowingly misrepresented material facts about the integration of the two companies throughout the proxy campaign; second, they contended that HP management improperly coerced and enticed Deutsche Bank into voting 17 million HP shares in favor of the transaction. Accordingly, the Hewlett Parties sought an order declaring Deutsche Bank's final voting proxy cards to be invalid, invalidating all proxies voted in favor of the merger, declaring that the proposal to issue additional HP shares in connection with the merger was defeated, or declaring that a new vote must be held on the proposed merger.
The court reviewed the corporation's integration planning process, conclusion that integration was vital to the merger's success (based, in part, on continuing value capture update analyses of gaps between bottom-up and top-down numbers), and consistent public reports of cost synergies and revenue loss targets to conclude that the shareholders failed to prove the corporation misrepresented or omitted material facts about integration in the proxy contest. The evidence demonstrated the corporation's statements concerning the merger were true, complete, and made in good faith, and management did everything it could do to maximize the chance that integration would be a success. The court also concluded that credible evidence indicated the bank's votes, of its own shares and managed shares (based upon a purported separation of the bank's commercial and asset management divisions) were based upon the harm the bank might incur, if the merger was not approved, substantive shareholder considerations, and not the promise of future business from the corporation. The court ordered that final judgment was to be entered in favor of the corporation on all claims asserted in the shareholders' complaint and that the shareholders' complaint was to be dismissed.