Reports: HP Forms Special Committee To Probe Board Handling Of Autonomy Deal

(RTTNews.com) - Computer and printer maker Hewlett-Packard Co. (HPQ) has formed a special committee and hired outside lawyers to investigate the board of directors' and management's handling of the company's $11 billion acquisition of UK software company Autonomy Corp plc, according to media reports on Monday.

The move was reportedly disclosed by HP in a private meeting that it reportedly held with its big investors on Monday.

According to the Wall Street Journal, the special committee is being run by Ralph Whitworth, co-founder of activist fund Relational Investors LLC. He joined HP's board in November 2011.

The WSJ reported that HP's board has also formed an ad hoc strategy committee to advise Chief Executive Officer Meg Whitman on "larger directional strategy". Whitworth is also said to be on the board's ad hoc strategic panel, along with venture capitalist Marc Andreessen and Shumeet Banerji, a senior partner at consultants Booz & Co.

Palo Alto, California-based HP acquired Autonomy in October 2011 for $11.7 billion. In November 2012, the company was sued by an investor on its Autonomy deal revelations as well as on a charge incurred on the deal.

HP incurred a non-cash impairment charge of $8.8 billion in the fourth quarter of fiscal 2012 relating to the Autonomy acquisition. HP had claimed that majority of the impairment charge was linked to serious accounting improprieties, misrepresentation and disclosure failures by Autonomy.

According to several media reports on Monday, HP Chairman Raymond Lane and other directors met with the company's big investors. The move came after activist investor CtW Investment Group threatened to launch a campaign to unseat Lane as well as two other board members John Hammergren and Kennedy Thompson, who are standing for re-election at the company's annual shareholder meeting to be held on March 20 in Mountain View, California.

CtW Investment Group is an arm of labor federation Change to Win. CtW advises union pension funds with about $200 billion in assets.

Following the meeting, CtW said it is recommending that HP's investors vote against the re-election of Hammergren and Thompson. However, the investment group added that it will not campaign against the re-election of Lane.

Hammergren, CEO of drug maker McKesson Corp. (MCK), chairs the HP board's finance and investment committee. Thompson, a former head of Wachovia Corp., is chairman of HP's audit committee.

CtW is also reportedly urging shareholders to vote against the appointment of Ernst & Young LLP as HP's auditor, citing the auditors failure to find accounting irregularities at Autonomy.

HPQ closed Monday's trading at $19.07, down $0.13 or 0.68 percent on a volume of 41.50 million shares.

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