25 March, 2013 - 09:24 By Tony Quested

Elephant in HP’s room has a smoking gun

At first sight it looked harmless enough: An open letter from Mike Lynch to the management of HP on the day of the US technology giant’s annual meeting.

A fruitless gesture? After all Mike Lynch and former management of Autonomy are facing a probe by the UK’s Serious Fraud Office over allegations of financial impropriety ahead of HP’s $11.1 billion takeover of the Cambridge business in October 2011.

But wait a mo. Take another look at Question 3 in Dr Lynch’s open letter.

“Did HP approach the UK Takeover Panel at any stage in an attempt to rescind its offer to buy Autonomy before completion? If so what was the reason it gave and why was this material change of view not communicated to shareholders?”

In a code far simpler than the algorithms at the heart of Autonomy’s technology, Lynch was telling HP’s management … “There’s a very large elephant in your room – and it’s carrying a smoking gun!”

He has information from a very good source that this was the case – after HP’s then CEO Leo Apotheker was fired on September 22, 2011 and before the deal closed a few weeks later under new CEO Meg Whitman.

HP remains hunkered down in its well-dug but heavily under-fire trench as writs whistle like howitzers overhead; it wants to let the proper authorities decide whether it was misled over Autonomy’s finances.

But here’s where it gets really interesting: Business Weekly spoke to The Takeover Panel and while they say it is not within their remit to comment on such matters they were able to illuminate the murk.

A spokesman said that a deal could only be overturned if a buyer proved there had been conduct so significant that it materially changed the terms of the original transaction.

If Lynch’s advisers are correct and HP asked The Takeover Panel to cancel the impending acquisition some time between September 22 and October 4 and the deal still went through – one can only assume the TP didn’t see any valid encumbrances. And no-one could argue that financial improprieties – some call them fraud – wouldn’t constitute conduct that materially changed the terms of a takeover.

There’s a very simple way of determining the truth in this regard – that is for The Serious Fraud Office to pick up the phone to The Takeover Panel and ask two simple questions.

1 - Did HP seek permission to back out? 2 – If so why was consent to do so not given?

If the panel says HP made no such request then it would raise justifiable doubts about the former Autonomy management’s sources of information and interested parties can follow HP’s counsel and sit back and let an inquiry run its course.

It’s got to be worth a few pence on a phone call. And it might save a few million of hard-earned taxpayers’ money on an inquiry.

Memo to the SFO – the Takeover Panel number is 0207 382 9026. It’s a lot cheaper than an elephant gun.

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