Hewlett-Packard and lawyers representing its shareholders have agreed to settle litigation over its troubled $11.1bn acquisition of software company Autonomy, according to a source familiar with the negotiations.
Under the terms of the settlement, involving three lawsuits, lawyers for the shareholders have agreed to drop all claims against HP's current and former executives, including chief executive Meg Whitman, board members and advisers to the company, the source said.
The exception to that will be former officials at Autonomy. As part of the agreement, the shareholders' lawyers will assist HP in pursuing claims against Autonomy's co-founder and former CEO Michael Lynch, its former chief financial officer Sushovan Hussain and potentially others related to Autonomy, the source said. The precise nature of such claims and when HP might file them could not be learned.
The company said: "HP is in serious discussions to settle the shareholder derivative litigation related to Autonomy, but no final deal has been reached yet." The settlement, which followed mediation, is expected to be announced as soon as Monday.
HP took an $8.8bn impairment charge in November 2012 for its purchase of Autonomy just over a year earlier, with more than $5bn of that linked to what HP said at the time were "serious accounting improprieties, misrepresentation and disclosure failures".
The size of the loss, and the speed with which it occurred, mark the deal as one of the most disastrous done by a major company in recent years.
Sources close to HP's investigation into the matter say the technology firm believes Autonomy's results and prospects were made to look much better than they were.
Lynch has consistently denied HP's allegations, saying it is blaming him for its own failure to manage Autonomy after the acquisition. A spokesman for Lynch said: "We continue to reject HP's allegations."
He said it appeared that Whitman would spend a large amount of HP money to avoid explaining in court why she made the November 2012 allegations about Autonomy.
"We hope this matter will now move beyond a smear campaign based on selective disclosure and HP will finally give a full explanation," the spokesman added.
Hussain has not responded to calls and emails. His lawyer, John Keker, did not respond to requests for comment.
Shareholders had sued HP board members and executives, accusing them of breaching their fiduciary duties and wasting corporate assets. The lawsuits sought corporate governance changes at HP, legal fees and the ability to pursue damages claims against those responsible for the acquisition.
HP has shared the results of its investigation into accounting questions at Autonomy with lawyers representing the shareholders, the source familiar with the negotiations said.
One of the law firms representing shareholders in the settlement, Robbins Geller Rudman & Dowd, declined to comment. The other firm, Cotchett Pitre & McCarthy, was not immediately available for comment.
Lawyers representing shareholders will receive fees for helping HP pursue any further claims, the source said. Additional terms of HP's settlement with shareholders are unclear.
HP's allegations of accounting improprieties, misrepresentation and disclosure failures at Autonomy have prompted an investigation by the US securities and exchange commission and the FBI, as well as the Serious Fraud Office. The FBI and SEC declined to comment. The SFO said its inquiry was "very much in progress".
It is unclear if the investigations by the authorities in the US and UK will lead to action against any parties involved in Autonomy or HP's deal to acquire it. At the end of March, HP also settled a lawsuit that accused the computer maker's former management of defrauding shareholders by abandoning a business model it had long touted. In that case, the company agreed to pay shareholders $57m.
The lawsuit was filed after former HP chief executive officer Léo Apotheker shocked investors in August 2011 by announcing plans to refocus the company on business services and products, which included the Autonomy purchase.
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