HP, Dell in Bidding War for 3PAR

HP blindsided Dell this morning by offering to acquiring storage vendor 3PAR for $1.6 billion, a bid that is 33 percent higher than last week’s $1.15 billion from Dell.

HP (NYSE: HPQ) announced that it has submitted a proposal to acquire all of the outstanding shares of 3PAR for $24.00 per share in cash. Dell’s (NASDAQ: DELL) initial offer came in at $18.00 per share.

HP’s proposal is not subject to any financing contingency and has been approved by HP’s board of directors. If approved by 3PAR’s (NYSE: PAR) board, HP expects the transaction to close by the end of the calendar year.

Dell declined to comment on HP’s counteroffer.

HP’s executive vice president and general manager, Enterprise Servers, Storage and Networking, Dave Donatelli, said the acquisition of 3PAR would accelerate HP’s Converged Infrastructure strategy, “particularly in cloud and scale-out markets.”

If Dell wins out, it plans to integrate 3PAR’s storage systems into its portfolio where they would join the Dell PowerVault, EqualLogic and Dell/EMC families.

3PAR’s InServ Storage Servers are comprised of a high-bandwidth, low-latency backplane that unifies cost-effective, modular, and upgradeable components into a highly available and automatically load-balanced cluster. The InServ’s main claim to fame is its “Thin Built In” technology, which is based on 3PAR’s homegrown ASIC technology and provides hardware-based thin provisioning for just-in-time capacity provisioning.

HP’s bid for 3PAR not its first

After a bit of tap dancing, HP revealed that its blockbuster bid for 3PAR was not its first.

HP published its offer letter in which executive vice president, chief strategy and technology officer Shane Robinson wrote:

“We propose to increase our offer to acquire all of 3PAR outstanding common stock to $24.00 per share in cash. This offer represents a 33.3% premium to Dell’s offer price and is a “Superior Proposal” as defined in your merger agreement with Dell.”

In a conference call with media and analysts this morning, Donatelli said HP had “done due diligence on this deal prior to anything you’ve seen announced publicly” and “had multiple meetings with [3PAR’s] senior management.”

Finally, when asked whether HP had an outstanding offer on the table when Dell made its move for 3PAR, HP’s Steve Fieler, vice president, investor relations, admitted that there was “another offer on the table.”

Donatelli also said he expects HP’s relationship with Hitachi would continue. “There is always going to be overlap in storage solutions. That’s been happening for the past 20 years and I don’t have any concerns about it. I actually view that as a positive because it makes sure you have a seamless offering and that you don’t have any competitive gaps.”

He also said HP “looks forward to the response” from Dell.

HP’s Offer Letter

The following is the full text of the letter HP sent to the 3PAR board regarding its offer:

August 23, 2010
Mr. David Scott
President and Chief Executive Officer
3PAR, Inc.
4209 Technology Drive
Fremont, CA 94538
Dear David:
We are pleased to submit to you and your Board of Directors a proposal to acquire 3PAR, Inc., (“3PAR”) which is substantially superior to the Dell Inc. (“Dell”) transaction. We are very enthusiastic about the prospect of entering into a strategic transaction with 3PAR and believe that a business combination with HP will deliver significant benefits to your stockholders, customers, employees and partners.
We propose to increase our offer to acquire all of 3PAR outstanding common stock to $24.00 per share in cash. This offer represents a 33.3% premium to Dell’s offer price and is a “Superior Proposal” as defined in your merger agreement with Dell. HP’s proposal is not subject to any financing contingency. HP’s Board of Directors has approved this proposal, which is not subject to any additional internal approvals. If approved by your Board of Directors, we expect the transaction would close by the end of the calendar year.
In addition to the compelling value offered by our proposal, there are unparalleled strategic benefits to be gained by combining these two organizations. HP is uniquely positioned to capitalize on 3PAR’s next-generation storage technology by utilizing our global reach and superior routes to market to deliver 3PAR’s products to customers around the world. Together, we will accelerate our ability to offer unmatched levels of performance, efficiency and scalability to customers deploying cloud or scale-out environments, helping drive new growth for both companies.
As a Silicon Valley-based company, we share 3PAR’s passion for innovation. We have great respect for 3PAR’s management team and its employee base, and are excited about the prospect of working together going forward. Our long track record of acquiring companies and integrating them seamlessly into our organization gives us great confidence that this will be a successful combination.
We are including with this letter a draft merger agreement with the same terms as your announced transaction with Dell but which eliminates the termination fee.
We understand that you will first need to communicate this proposal and your Board’s determinations to Dell, but we are prepared to execute the merger agreement immediately following your termination of the Dell merger agreement. We also are prepared to commence a cash tender offer reflecting our higher price. Our tender offer would, of course, be conditioned upon your Board of Directors’ approval of a transaction with HP.
We look forward to making this opportunity a reality and consummating a mutually beneficial transaction.
Shane Robison
Executive Vice President and Chief Strategy and Technology Officer HP

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Kevin Komiega
Kevin Komiega
Kevin Komiega is an Enterprise Storage Forum contributor.

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