HP pays $2.4 bln to kick Dell’s ass in 3PAR bidding war

On August 16 Dell Inc said it wanted a larger piece of the data center pie and revealed plans to buy data storage company 3PAR Inc for $18 a share. 3PAR, which has barely made a profit since it was founded in 1999, had closed at $9.65 on August 13. Dell’s offer, valued at $1.15 billion was at a whopping 87 percent premium to 3PAR’s last close price.
Analysts were generally of the opinion that Dell was overpaying for the company. Till now things were sane. The insanity starts now.
Hewlett-Packard Co, smarting from the embarrassment of having had to chuck out a philandering Chief Executive, decided to jump into the fray. So HP, the world No. 1 PC seller put in a higher bid for 3PAR, trumping Dell.
But Dell was determined not to ring the death knell for its bid for 3PAR. What followed, was a rapid series of bids, counter bids and counter-counter bids. Here is what happened.

Dell’s bid – $1.15 Bln
HP’s counter-bid – $1.6 Bln
Dell’s counter-counter-bid $1.6 Bln
HP’s counter-counter-counter-bid $1.8 Bln
Dell’s counter-counter-counter-counter-bid $1.8 Bln
HP’s counter-counter-counter-counter-counter-bid $2.0 Bln
Dell’s counter-counter-counter-counter-counter-counter-bid $2.0 Bln
HP’s counter-counter-counter-counter-counter-counter-counter-bid $2.4 Bln
Dell blows the whistle

On Sept 2, after more than two weeks of frantic press releases from all three companies involved in the bidding war, Dell finally bowed out of the mad bidding war for 3PAR.
Strangely enough, Dell shareholders did not show much relief at the stop to the insanity, just as they had not shown any reaction to the unreasonable bids. This curious placidity led one Reuters commentator to wonder — “Are Dell’s shareholders on Xanax?” – Xanax being a Benzodiazepine used to treat anxiety and panic disorder!
Since I am certainly not on Xanax or any other drug for that matter, I am anxious to point out that a lot of interesting things could have happened in the “other leg of the trouser of time.”
What if HP bowed out just before its ultimate bid? It would have left Dell with a very hot potato. Dell would have had to buy 3PAR for $2 billion — $850 million more than what it had originally intended to cough up for the company!
And I don’t know what’s been happening at HP’s Palo Alto, California-headquarters, perhaps they are too overwrought with the shenanigans of ex-CEO Mark Hurd, the high-profile chief who stepped down on Aug. 6 after a probe into his hanky-pankying relationship with a contractor. But I would have thought that they would have woken up to the fact that they are paying $2.4 billion for a company that has just below half a billion in sales for the past three full fiscal years that it has reported. And the price that HP is paying is more than twice – a $1 billion more than– what Dell had initially offered.
3PAR I am sure is laughing all the way to the bank. The stock that had traded largely bound in the range $4.25-$17.99, catapulted to $33.84 on Thursday. And they can thank Frank Quattrone, who advised 3PAR in the current negotiations with DELL and HP. The man is a genius.. a salesman PAR excellence. (pun intended, of course!)
A superhero among investment banker in the 1990s, Quattrone steered some of the biggest tech IPO’s of his time. These include Amazon.com and Cisco Systems.
Tech companies normally show great restraint when it comes to bidding wars. The last notable one that comes to mind is the spat between EMC Corp and NetApp last year, when they were at each others throats in a bid to buy Data Domain for $2.4 billion.
It does not take a genius to identify common themes in the EMC-NetApp war battle and the most current one between HP-Dell.
In both cases bidding stopped at a whopping $2.4 billion. And in both cases the company being auctioned off was advised by Quattrone.
So are you thinking what I am thinking? Yes! If you have a company that you want sell, just hire Frank Quattrone. And lie back and enjoy the show as Tech titans fight like ally

The titans and the dwarf !

cats. Valuations, forward earning multiples be damned .. we have Quatrrone in the cockpit and the sky is barely the limit!

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One Comment

  1. Divya
    Posted September 22, 2010 at 12:59 am | Permalink | Reply

    good stuff! seriously … love the way you’ve written this post !

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