Hewlett-Packard Co. may have paid more than it needed for 3Par Inc. because it outbid a Dell Inc. offer that 3Par already rejected, said two people close to the situation.
3Par had turned down Dell’s sweetened $32-a-share bid when HP increased its offer to $33 a share, said the people, who declined to be identified because the talks were private. HP, concerned that 3Par was on the verge of accepting Dell’s latest proposal, raised its offer 90 minutes before 3Par was due to publicly disclose its decision, said another person.
“When a company makes a bid for a target that has an agreed deal, that bidder is in catch-up mode,” said Frank Aquila, a partner at law firm Sullivan & Cromwell LLP in New York. “At a certain point, that bidder needs to be ready to make a bold move to win the target company and end the bidding.”
3Par took issue with the conditions Dell imposed on its $32-a-share offer, which was made privately. The terms included an increased termination fee of $92 million and a demand that 3Par sell its products to Dell at a fixed price if it accepted a competing bid. The conditions were “determined to be unacceptable” by 3Par’s board, the Fremont, California-based maker of storage systems said in a statement.
HP and 3Par’s boards approved the deal, which is expected to close by the end of the year, the companies said today in a joint statement. 3Par said it paid Dell a $72 million breakup fee stipulated in a previous agreement.
Financial, Legal Advisers
Hewlett-Packard’s final offer cost it an additional $188 million, based on 3Par’s shares outstanding.
Spokesmen for Palo Alto, California-based HP, 3Par and Round Rock, Texas-based Dell declined to comment for this story.
HP was advised by JPMorgan Chase & Co. and Cleary Gottlieb Steen & Hamilton. 3Par’s financial adviser was Qatalyst Group, the San Francisco-based boutique founded by veteran technology dealmaker Frank Quattrone. Wilson Sonsini Goodrich and Rosati LLP was 3Par’s legal adviser. Dell was advised by Credit Suisse Group AG and Debevoise & Plimpton LLP.
By clinching the purchase of 3Par, HP, the world’s biggest personal-computer maker, adds data-center products that will help it compete with storage leaders like EMC Corp. Dell began the public bidding for 3Par at $18 a share on Aug. 16.
The per-share deal price is more than three times the $9.65 closing price of 3Par stock on Aug. 13, before Dell’s initial bid was made public. It’s also about 10 times 3Par’s total revenue over the past four quarters.
HP rose 47 cents to $39.68 at 4 p.m. in New York Stock Exchange composite trading. 3Par gained 80 cents to $32.88. Dell, the No. 3 PC maker, advanced 24 cents to $12.36 on the Nasdaq Stock Market.
In addition to strengthening its storage products, HP wanted to show it could clinch the deal following the departure of its chief executive officer, said Aaron Rakers, an analyst at Stifel Nicolaus & Co. in St. Louis.
Former CEO Mark Hurd left Aug. 6. Since then, HP has made two other acquisitions -- Fortify Software Inc. and Stratavia. Dave Donatelli, who led the 3Par deal, is said to be one of the candidates to replace Hurd.