HP Faced Tough Competition in Palm Bid

New details have emerged regarding Hewlett-Packard’s $1.2 billion acquisition of Palm. While the smartphone maker may have been financially struggling, it was hardly an unnoticed wallflower before HP came along, according to a proxy statement Palm filed with the Securities and Exchange Commission.
The statement reads a bit like a novella, detailing the advancements, negotiations and refusals that occurred in the weeks leading up to HP’s April 28 announcement.
According to the statement, 16 companies expressed interest in Palm between Feb. 25 and April 1, and six – HP included – entered into nondisclosure agreements and met with Palm and its advisers to review private information. HP is the only company directly named in the statement, with the others referred to as Company A, etc.
On April 13, HP made its first move for Palm, offering $4.75 per share, or approximately $1 billion, and requesting a 30-day period of exclusive negotiations. Company A followed by offering $600 million in cash, while Company B proposed a stock-for-stock transaction that “did not specify the value of the proposed consideration,” according to the statement.
Following the offers from companies A and B, Palm told HP that it wouldn’t consider an exclusive negotiating period unless HP upped its offer. On April 17, however, HP reaffirmed its proposal for $4.75 in cash for each share of Palm.
Offering its respects to A and B, Palm declined both deals, and on April 18 a Company C offered $6 to $7 cash per share, with the stipulation that a deal take place within 14 days. The next day, Palm sent both HP and Company C draft merger agreements.
On April 20 and 21, senior management at Palm, HP, Qatalyst Partners and Goldman Sachs met again, and on April 22 HP increased its offer to $5 per share, with the request that “Palm agree to up to a 28-day period of exclusive negotiations with HP with an objective of entering into a merger agreement as soon as practicable.”
Company C countered with a reduced offer of $5.50 per share and the request that “Palm agree to a period of exclusive negotiations lasting until April 26.”
Courted from both sides, Palm looked to sweeten the deal. On April 24 it told HP that “to remain in the process, HP must improve its offer significantly and immediately.” That same day, HP financial advisors responded with an offer of $5.70 per share and the request of a five-day exclusivity period. The following day, reports the statement, “HP delivered a letter confirming this proposal with a target announcement date of close of business on April 27 and sent a draft exclusivity agreement covering such period on April 26.”
On April 28, the two made their big announcement.
“We anticipate that with the webOS [Palm’s proprietary mobile operating system], we’ll be able to aggressively deploy an integrated platform that will allow HP to own the entire customer experience, to nurture and grow the developer community, and provide a rich media experience for our customers,” Tom Bradley, executive vice president of HP’s Personal Systems group, said in a Webcast that day.
While the comment suggested that the Palm purchase could offer HP a way into the exploding smartphone market, it’s rumored that HP additionally has plans to relaunch its cancelled Slate tablet, which was to run Windows 7, as the HP Hurricane, a tablet running webOS.
Since the launch of the Apple iPad, the tablet market has been rejuvenated, with Sony the most recent electronics maker to admit it’s considering joining the fray and research firm BCG reporting that within the next three years, its expects 50 to 75 percent of consumers to purchase a tablet-style device.
While the identities of the Palm suitors may remain a secret, thanks to Palm’s discretion, a company referred to in the statement as Company D contacted Palm on March 18 to “discuss an intellectual property transaction but did not make a proposal to acquire Palm.” Further, says the statement, “Company D did not enter into a nondisclosure agreement,” which means new details – or at least the identity of Company D – may yet still emerge.
Immediately following the mid-April news that Palm was available, HTC, Lenovo, Motorola and Nokia were all named as potential purchasers.