So, a rather baffling bid battle rages on – with yet another counter-offer from HP (see update below) after we reported on Friday that Dell looked to have won out in the most frenzied bidding war we’ve seen in recent times. That came after the US computer giant matched Hewlett-Packard’s (yet again) revised $1.8bn offer for US data storage company 3Par, Reuters reports, on Friday.
And like any good tech company, 3Par within hours of accepting Dell’s offer, had the news on its corporate website.
Reams have been written about the bid battle, which had taken yet another twist on Thursday when HP – again – trumped Dell to offer $1.8bn over Dell’s sweetened bid of $1.6bn..
At that point, observers really began wondering. As Lex noted:
Few things inspire a loss of rationality quite so much as the fear of missing out. The phenomenon is apparent around buffet tables, in one-day sales, and now in the pursuit of computer storage company 3Par. Dell on Thursday decided to match Hewlett-Packard’s madness, trumping its competitor’s counterbid of $1.6bn by 1 per cent. Later in the day, HP slapped another $200m on the table, 50 per cent more than Dell agreed to pay last week, and almost impossible to rationalise.
“Impossible to rationalise” might be one way to put it. It raises the question that has been on many observers’ minds: what makes this company so special, are its data storage products as fabulous as it claims they are? Is it a corporate culture that, according to its own glowing account, provides a “nurturing environment that promotes individual innovation, expression and achievement”?
Why were the two tech giants so eager to outbid each other? Is it personal? Or is it simply a throwback to those crazed acquisitive days of the dotcom boom.
The close involvement of former star investment banker Frank Quattrone in the 3Par battle would suggest a return to the dotcom mania of the early 2000s.
As DealBook noted:
Qatalyst Partners, a fairly new investment bank run by Mr. Quattrone, is representing 3Par, which has accepted a sweetened bid of more than $1.5 billion from Dell.
Better known for initial public offerings than takeover battles, Mr. Quattrone made his name during the Internet boom. He helped take more than 100 technology companies public, including Amazon.com and Cisco Systems. His career was derailed by a four-year fight against obstruction of justice charges. His 2004 conviction was overturned by an appeals court, and the charges were dismissed in 2007.
The next year, he founded Qatalyst. In a 2009 interview with Claire Cain Miller of The New York Times, Mr. Quattrone described his role in Silicon Valley as “a catalyst, and possibly senior adviser, cheerleader, truth-teller, participant.”
Gee, is that all, Frank?
With 3Par looming as an improbably glittering trophy over the brawling tech giants, Quattrone is also looking like a winner out of the 3par deal.
He – and 3Par – may also be laughing all the way to the bank. As Lex added:
Will there be a counter counter counter counter bid? Justifying Dell’s last offer already assumed insane amounts of growth, and actual profit generation. The fast sprouting 3Par has taken sales from $38m to $194m in just five years, but not managed to turn an operating profit. Dell’s plan is to sell 3Par product through its much larger global sales operation, and it does have some form in growing acquisitions – second quarter sales at EqualLogic, another storage business bought for $1.4bn in January 2008, were up 63 per cent on a year ago. But how much growth is needed this time?
“Insane” in this context may end up being an appropriate word. In matching HP’s latest $1.8bn offer, Dell, according to Lex’s calculations, would have to generate after-tax profits of $180m from 3Par in order to make a “respectable” return of, say, 10 per cent in five years. At Dell’s current 29 per cent tax rate, that would require 2015 revenues of $1.2bn: “a sixfold sales increase in five years, not to mention spectacular profitability”.
So, it concludes: “Who needs rationality when desperation and blind optimism conspire so well?”
And the same, undoubtedly, applies to the folks at HP.
Update (1430 BST) – And the beat goes on. HP came back at Dell with another offer on Friday, via Reuters:
RTRS-HP ANNOUNCES REVISED PROPOSAL TO ACQUIRE 3PAR FOR $30 PER SHARE IN CASH
RTRS-HP SAYS PROPOSAL REPRESENTS AN 11 PER CENT PREMIUM ABOVE THE MOST RECENT PRICE OFFERED BY DELL
RTRS-HP SAYS DEAL HAS ENTEPRISE VALUE OF $2.0 BILLION
This really is getting ridiculous…
Related links:
Who needs 3Par more – HP or Dell? - DealJournal
3Par contest shows demand for data storage – NYT
Virtualization: one more benefit and one more HP problem - BC
M&A groundhog day: could it all end in tears? – FT Alphaville