As one commentator on Carl Icahn’s blogsite says, “The most effective activism is at the shareholder voting level; the other method is at the political level.”

Electronic Data Systems has called a special stockholders meeting for July 31 to consider and vote upon the proposed merger with Hewlett-Packard, announced this May. The deal would instantly create the world's second-largest IT and business services company—but there are a pair of lawsuits in the way.

First, there is the complaint from EDS shareholder Joseph Villari that the merger undervalues the company—he wants Delaware Chancery Court to force EDS to auction itself off for a higher price.

And Utah-based Intermountain Ironworkers Trust Fund is seeking to block the marriage, alleging that the proposed sale agreement prohibits EDS directors from seeking a higher price from alternative bidders, while guaranteeing HP a $375 million payout if the merger goes unconsummated.

On behalf of all EDS’s public shareholders, the trust fund alleges that, by entering the agreement, EDS directors breached their fiduciary duties to the company’s shareholders.

“This deal leaves EDS shareholders out in the cold,“ states Russell Budd of Dallas-based law firm Baron & Budd, attorneys for IITF. “They had no say in the transaction, and the company directors who are charged with protecting their interests looked the other way.”

Baron & Budd has fought to protect shareholder interests in corporate transactions before. As co-lead counsel in the 2005 take-private deal of convenience store operator 7-Eleven (also Dallas-based), the firm succeeded in boosting the tender offer by $5 per share, worth $145 million to shareholders.

Jeff Heilman

6/24/08