That bested Dell’s earlier $27-a-share proposal, which 3Par had accepted. Dell started the public bidding at $18 a share on Aug. 16 and has matched or topped subsequent proposals from rival computer maker HP. Yesterday’s surge in 3Par stock to as high as $32.58 suggests investors expect more jostling.
“Stick around for the fireworks because this is not likely the end of the tussle,” Dave Novosel, an analyst at Gimme Credit, wrote in a note to clients yesterday. “Hewlett-Packard is not going away easily.”
HP’s latest offer is more than three times the closing price for 3Par’s stock on Aug. 13, before Dell’s first bid was made public, and it’s about 10 times annual revenue at 3Par, which has lost money every year since going public in 2007. 3Par said late yesterday that HP’s last offer was superior to Dell’s latest terms, giving Dell three days’ notice that it intends to terminate their agreement.
The escalating price reflects the growing urgency for both HP and Dell to use acquisitions to fuel growth. It also underscores the lack of affordable runners-up capable of helping them vie with the world’s top storage providers, such as EMC Corp.
Under its agreement with Fremont, California-based 3Par, Dell can match other offers and will be paid a termination fee of $72 million if 3Par accepts a different proposal.
“We’ve got the right to match other offers,” Dell spokesman David Frink said earlier yesterday. “We are assessing and will act at some point in the best interests of investors and customers.”
Dell’s Jess Blackburn didn’t immediately respond to a request for comment after 3Par declared HP’s offer to be superior. Mylene Mangalindan, an HP spokeswoman, also didn’t respond to a request for comment after business hours.
3Par climbed $6.43, or 25 percent, to $32.46 yesterday in New York Stock Exchange composite trading. HP, based in Palo Alto, California, fell 22 cents to $38. Dell climbed 14 cents to $11.89 in Nasdaq Stock Market trading.
Dell’s gain may indicate relief among investors that the company won’t have to pay such a high premium, said Andy Hargreaves, an analyst at Pacific Crest Securities.
“For Dell, it’s a lot of money,” said Hargreaves, who’s based in Portland, Oregon. “There’s the potential for that to pay off, but you’d have to be hugely successful for that to break even and that’s not a great bet.”
HP’s offer, valuing 3Par at almost three times the 20-day average of its stock price before Dell’s Aug. 16 bid, is the highest premium offered in a competitive situation among 19,036 completed and terminated deals tracked by Bloomberg since 2001.
In addition to strengthening its storage products, HP wants to show it can clinch the deal after the departure of its chief executive officer, said Aaron Rakers, an analyst at Stifel Nicolaus & Co. Former CEO Mark Hurd left Aug. 6, following a probe that found he filed inaccurate expense reports to conceal a personal relationship with a marketing contractor.
HP and Dell both have the ability to keep increasing their bids, with about $15 billion and $12 billion in cash, respectively, according to their most recent financial statements. HP’s profit and market value are more than three times those of Dell.
3Par sells hardware and software that make it easier and cheaper for companies to store information. HP and Dell are betting they can ramp up 3Par’s revenue by dispatching their larger sales teams to hawk its gear, said Shannon Cross, an analyst at Cross Research in Livingston, New Jersey.
“You just literally can target a wider addressable market,” she said. “The model has been proven to work.”
HP, the world’s top PC maker, would gain higher-end storage products, helping it package its servers, storage and networking equipment for corporate customers, said Jeff Fidacaro, an analyst at Susquehanna Financial Group in New York. For Dell, owning 3Par would mean a chance to sell its own storage systems, rather than reselling products from EMC, he said.