Hewlett-Packard Co. (HPQ) agreed to settle investor lawsuits over its acquisition of Autonomy Corp., which led to an $8.8 billion writedown in 2012, a person familiar with the matter said.
Under the accord, which will be announced Monday, the computer maker and the investors agreed to jointly pursue claims against Autonomy co-founder Michael Lynch, said the person, who asked not to be identified because the matter wasn’t public. Hewlett-Packard said it’s still negotiating.
“HP is in serious discussions to settle the shareholder derivative litigation related to Autonomy, but no final deal has been reached yet,” the Palo Alto, California-based company said in a statement.
Hewlett-Packard began talks as early as February with shareholders’ lawyers on how to proceed with so-called derivative suits filed on the company’s behalf. Investors allege that the company, its board and executives including Chief Executive Officer Meg Whitman ignored warnings about accounting irregularities at Autonomy and failed to properly vet the British software maker’s finances before the $10.3 billion acquisition in 2011.
“We continue to reject HP’s allegations and note that over recent months a number of documents have emerged that prove Meg Whitman misled her shareholders,” a spokesman for Autonomy’s management team said in an e-mailed statement.
Securities lawyers have said Lynch, who shareholders claim made $800 million from the sale of Autonomy, may be an attractive target for a revised lawsuit.
“It’s unusual to join forces in this way, so this is an interesting development,” Deborah DeMott, a law professor at Duke University, said in an e-mail, referring to plaintiffs working with Hewlett-Packard to pursue Lynch.
DeMott said Autonomy’s statement about Whitman is “not inconsistent with the shareholders’ claims that Lynch misled HP.” It’s unlikely that Autonomy’s response would work as a defense for Lynch if his statements are found to amount to fraud, DeMott said.
“Tort law generally recognizes that more than one actor may be at fault or responsible for a victim’s losses,” she said. Autonomy’s statement seems to “imply that if Whitman made misleading statements, that somehow exonerates Lynch,” she said. “I disagree.”
Hewlett-Packard’s acquisition of Autonomy was engineered by its previous CEO, Leo Apotheker, who was also named as a defendant in one of the suits to be settled. Apotheker received $7.2 million in severance when he was ousted in 2011 after cutting sales forecasts three times and making strategy shifts that blindsided investors.
“Mr. Apotheker has maintained all along that he acted with integrity, good faith and in partnership with the HP Board on the Autonomy acquisition,” his spokeswoman, Alexandra LaManna, said in an e-mailed statement.
The settlement will resolve one shareholder suit in federal court in San Francisco and two cases filed in state court, the person said. Other shareholder suits related to the acquisition of Autonomy remain unresolved. The complaints were filed after Hewlett-Packard said it was writing down Autonomy’s value. More than $5 billion of the writedown resulted from Autonomy’s accounting practices, Hewlett-Packard said.
Hewlett-Packard shares fell to a 10-year low and the company lost about $3 billion in market value on Nov. 20, 2012, the day it announced the charge.
The federal shareholder lawsuit is In re Hewlett Packard Shareholder Derivative Litigation, 12-cv-06003, U.S. District Court, Northern District of California (San Francisco).
(An earlier version of this story was corrected to fix the spelling of spokeswoman's name.)
To contact the reporter on this story: Joel Rosenblatt in San Francisco at firstname.lastname@example.org