Updated: HP raises 3PAR bidding to a cool US$2 billion

Published: August 27th, 2010

It’s been a busy morning of offer and counter-offer between Hewlett-Packard Co. (NYSE: HPQ) and Dell Inc. (NASDAQ: DELL) as the two companies battle to acquire storage vendor 3Par.

The latest move sees HP offering US$2 billion or US30/share for 3PAR, which tops Dell’s offer earlier this morning of US$1.8 billion, or US$27/share. That offer from Dell was a match of HP’s earlier offer, which was a follow-up to an earlier offer of US$1.6 billion from HP that was also matched by Dell. As the company that reached the original acquisition agreement with 3PAR for US$1.15 billion last week, Dell retains the right to match competitive offers.

The companies are squabbling over a maker of storage arrays that are well-suited to virtualized environments, which would allow them both to expand in the fast-growing market for “private cloud” infrastructure. The escalating bids point to the strategic value they place on 3PAR’s technology.

Dell offered to buy 3PAR at the start of last week for US$18 per share, or about US$1.15 billion net of 3PAR’s cash. HP made a counterbid on Monday, offering US$24.00 per share, or about US$1.6 billion.

Dell topped that offer by US$0.30 on Thursday morning, and HP wasted no time with its latest counterbid, which puts the price tag at US$1.8 billion.

The ball is now back in HP’s court.

HP earlier acknowledged it was offering a high price for 3PAR, which reported a loss of US$959,000 for its fiscal year ended March 31, on annual revenue of US$185 million. HP’s offer of US$27 per share is almost three times what 3PAR’s shares were trading at before the acquisition battle began.

But HP argued that it is “uniquely positioned” to execute on the transaction and that the deal provides value to its shareholders. “We have a strong business case and are confident this transaction makes strategic and financial sense,” HP said.

3PAR was founded in 1999 and has about 650 employees. It says it has more than 6,000 clients including managed service providers Savvis, Verizon Business and Terremark; Internet companies MySpace.com, Tickets.com and Priceline.com; and enterprise customers such as Pier 1 Imports.

The company spent 25 per cent of its revenue on research and development last year, according to its 2009 annual report, relatively high compared to other technology firms. The figure has been declining, however, from 29 per cent in 2008 and 37 per cent the year before that.

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