Dell Surrenders: HP Gets 3PAR for $2.35 Billion

 
 
By Chris Preimesberger  |  Posted 2010-09-02
 
 
 

Minutes after being rebuffed by yet another higher offer for 3PAR from Hewlett-Packard, Dell decided on Sept. 2 to drop out of the high-stakes bidding process for the utility storage provider.

Thus, with its final $33-per-share, all-cash bid, the Palo Alto, Calif.-based IT superpower will gain the envied intellectual property of a small but mature storage company that specializes in handling data in massive amounts for large-scale IT systems.

Finalization of the transaction, however, will be dependent upon the shareholders of each company, who will vote on the deal within the next few weeks.

For its trouble, Dell is entitled to receive a $72 million break-up fee from 3PAR upon the termination of its merger agreement they signed back on Aug. 16.

HP revealed in a statement later in the day that the total price would amount to $2.35 billion. The Associated Press had estimated $2.1 billion, and others -- including the Wall Street Journal and Bloomberg News -- had believed the number to be as high as $2.4 billion.

Dell's final offer to acquire 3PAR at $32 per share of common stock with a $92 million break-up payment was not accepted by 3PAR's board of directors.

"We took a measured approach throughout the process and have decided to end these discussions," said Dave Johnson, senior vice president, corporate strategy.

Earlier in the day Sept. 1, Dell had increased its offer for 3PAR from $27 to $32 per share, with Hewlett-Packard subsequently upping its own to $33 from $30 a few minutes later.

Dell had written into its original agreement with 3PAR that it had the right to match any competing offer.

Since the bidding began on Aug. 23, each time Dell put forth an offer, HP countered with a substantially higher one. HP's first bid was $24 per share, or about $1.6 billion.

When the bidding battle ended Sept. 2 with HP's final $33 offer, it meant that the Dell-HP war of bank accounts cost HP at least an additional half-billion dollars.

All this bidding was for a company with a market cap of $1.63 billion and whose stock was selling at $9.65 on Friday, Aug. 13 -- the last day of trading before Dell made its first acquisition announcement on Monday, Aug. 16.

3PAR was selling at $32.83 on Sept. 2 and has been above $30 for most of the last week.

Why is 3PAR such a wanted company?

3PAR is considered a prime asset primarily for three reasons:

No. 1: Its clustered, utility-type architecture is tailor-made for cloud systems that deliver software as a service, and cloud storage systems are in high demand at this time.

No. 2: 3PAR began shipping its own brand of autonomic storage tiering, called Adaptive Optimization. The process actually prevents common storage bottlenecks from happening in the first place through a combination of business and operational intelligence, gained by a constant collection of data. 3PAR's version anticipates data blockages and solves them before they happen.

3PAR Adaptive Optimization follows this concept to enable high-end-type storage systems to achieve an efficient distribution of data over the application life cycle, without needing intervention by an administrator, the company says.

No. 3: The company is available for sale. Others that address the exact market as 3PAR are not available, Dell said.

For more background, see the following eWEEK articles:

Dell, HP Stubbornly Raise Stakes in Bidding War for 3PAR

Why is 3PAR such a hot property?


Dell explains why 3PAR is strategic to its needs


HP's motives in the bidding war

Editor's note: This article was updated to include the final purchase price of $2.35 billion and additional detail.

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