Link to original article
https://www.msn.com/en-us/money/companies/hpe-to-face-lawsuit-for-allegedly-misleading-dxc-investors/ar-AA16iWMe?ocid=winp2fptaskbarhover&cvid=d2f1f9d9e64848ceaa66963c7ba73c8e
The case asserts liability against HPE and DXC, and “certain current and former officers and directors of HPE, DXC, and CSC” under the US Securities Act of 1933.
In the original filing [PDF], the plaintiffs claim that documents relating to the merger promised “first-year synergies of approximately $1.0 billion post-close, with a run rate of $1.5 billion by the end of year one”, which would be delivered by “benefits from expected economies of scale such as volume discounts as well as cost synergies expected from workforce optimization such as elimination of duplicative roles and other duplicative general, administrative and overhead costs.”
It is also claimed that investors were told that the combination of the two complementary businesses would “create one of the world’s largest pure-play IT services companies” which thanks to its unique position would be expected to have “annual revenues of $26 billion and more than 5,000 clients in 70 countries.”
But the filing states that the merger literature downplayed the cost reduction part of the turnaround plan, and that it claimed the post-merger DXC would be able to attract and retain highly motivated people with the skills necessary to serve their customers.”
And while this version of the post-merger plan was being presented to investors, the filing asserts that Defendant Lawrie (former DXC and CSC CEO Mike Lawrie) had his own internal forecasts that presented a different picture - a planned workforce reduction worth $2.7 billion in the first year alone, nearly three times the $1 billion of total “synergies” that investors were informed of.
The plaintiffs claim that the impact of these cuts and firings was that DXC was left without the resources to deliver on its client contracts, leading to a decline in client satisfaction, and that the financial metrics offered to them in relation to the merger were therefore “false and unrealistic”.