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HP to Settle Shareholder Claims on Autonomy Deal

Shareholders will end claims with HP but may still go after former Autonomy CEO Mike Lynch.

Computing giant Hewlett-Packard is close to settling a shareholder derivative lawsuit stemming from its $11.1 billion acquisition of the British software company Autonomy in 2011.

As Reuters reported earlier today, a deal between HP and lawyers representing shareholders could be announced as early as Monday. Re/code first reported that the talks were under way in February.

“HP is in serious discussions to settle the shareholder derivative litigation related to Autonomy, but no final deal has been reached yet,” an HP spokesman said.

The shareholders group sued HP in 2012 in the U.S. District Court for the Northern District of California for allegedly misleading statements about the financial health of Autonomy. HP paid more than $11 billion for the software firm, but later admitted that it overpaid and wrote down the value of Autonomy by about $5 billion as part of a larger $8.8 billion write-down in late 2012.

The company has alleged that Autonomy’s prior management, including its former CEO Mike Lynch, engaged in a series of accounting improprieties that were intended to inflate its value ahead of the acquisition and has referred the matter to regulators in both the U.S. and U.K., who are investigating. Lynch has denied any improprieties.

“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 the former Autonomy management team said in an emailed statement. “We hope this matter will now move beyond a smear campaign based on selective disclosure and HP will finally give a full explanation.”

As part of the deal, sources tell Re/code, all shareholder claims against HP stemming from the botched acquisition will be dropped. And if HP ever pursues legal cases against Lynch, former Autonomy CFO Sushovan Hussain or other former Autonomy executives, the law firms will assist HP in bringing those claims. The shareholders have been represented by the law firms Cotchett, Pitre & McCarthy, LLP and Robbins Geller Rudman & Dowd LLP. Mediation talks have been held before retired U.S. District Court Judge Vaughn R. Walker.

The settlement deal will cover three distinct shareholder derivative suits, including the one in federal court and two others pending in state courts. It has no bearing on several shareholder class action lawsuits that are still pending.

Since 2011, some shareholders have wondered how HP could have missed so many problems at Autonomy before buying it without opposition from the board. While the acquisition was one of several actions that ultimately cost then-CEO Léo Apotheker his job, current CEO Meg Whitman was a member of HP’s board of directors and voted in favor of the acquisition. To this day she stands by the acquisition, but not the price paid.

“Mr. Apotheker has maintained all along that he acted with integrity, good faith and in partnership with the HP board on the Autonomy acquisition,” a spokeswoman for Apotheker said in an emailed statement. “He believes the Special Committee’s conclusions are a welcome measure of vindication given some of statements and innuendo against him at the time, and he is pleased to have this chapter behind him.”

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