Hewlett-Packard Co. (HP) has agreed to pay $100 million to settle a proposed securities class action over its disastrous $11 billion acquisition of British software company Autonomy Corp. PLC. The lead Plaintiff reported the settlement to U.S. District Judge Charles R. Breyer, a California federal judge on June 9. Dutch pension fund manager and lead Plaintiff PGGM Vermogensbeheer BV said that the putative class of HP shareholders, which is seeking certification for purposes of the settlement, will drop claims that the company misled investors about the value of Autonomy after the August 2011 announcement of the acquisition. PGGM told Judge Breyer:
The settlement represents one of the top 15 securities fraud recoveries in the history of this district. It also represents the only monetary recovery for HP shareholders arising from HP’s acquisition of Autonomy Corporation PLC, despite years of government investigations.
The proposed settlement with PGGM comes after Judge Breyer gave preliminary approval in March to a separate settlement that promises corporate governance reforms to settle HP shareholders’ derivative claims over the Autonomy acquisition. The latest proposed settlement calls for Judge Breyer to certify a class of investors that bought HP stock between the company’s August 2011 announcement of the Autonomy deal and its November 2012 disclosure of an $8.8 billion write-down.
The litigation stems from HP’s acquisition of Autonomy and the $8.8 billion write-down. Shortly after that disclosure, HP shareholder Allan J. Nicolow filed the first of several securities class actions over the loss, alleging that HP executives concealed information showing that Autonomy’s acquisition price was partially based on misleading financial statements and falsified accounting.
Judge Breyer consolidated the securities suits over the Autonomy debacle in March 2013, naming PGGM as the lead Plaintiff and Kessler Topaz Melter & Check as lead counsel. The judge partially dismissed the litigation in November 2013, releasing several HP executives, but the Plaintiffs were allowed to proceed with some claims against the company and CEO Meg Whitman. Neither Ms. Whitman nor any other individual will contribute to the $100 million settlement fund, which will be paid by HP’s insurance, the company said in a statement.
In addition to the securities class actions, HP faced numerous derivative suits over the failed acquisition. Judge Breyer’s March order in the derivative cases gave tentative approval to the third amended settlement, which differed from previous versions he had rejected by narrowing the release of claims to HP’s conduct relating only to the Autonomy acquisition.
HP has blamed the ill-fated deal on misrepresentations by Autonomy executives. In March, the technology giant filed a $5 billion suit in a United Kingdom court, accusing two of Autonomy’s former officers of artificially inflating revenues for two years ahead of the acquisition. The U.K.’s Serious Fraud Office said on Jan. 19 that it had closed a two-year investigation into whether Autonomy made misrepresentations to HP before the deal, finding “insufficient evidence for a realistic prospect of conviction” with respect to some of HP’s allegations against Autonomy.
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