HP vs. Dell with 3Par as the Prize: The Battle Continues

There has been a bidding war between Dell (News - Alert) and Hewlett-Packard over who will own global utility storage provider 3PAR, Inc. The Wall Street Journal reported yesterday that Hewlett-Packard raised its bid for data-storage company 3PAR to $27 a share, topping an offer by rival Dell earlier in the day.

TMCnet had earlier reported Dell had announced that 3PAR had accepted its increased offer to acquire the storage leader for $24.30 per share in cash, or approximately $1.6 billion cash. According to Dell, its previous offer to buy 3PAR for $18 per share came with a provision for matching competing bids.

Consequently, the two companies signed an amendment to the agreement reflecting the new offer price. Hopefully, they kept their pens at the ready.It appears the battle isn’t over.

Market Watch announced this morning that HO has raised its offer to $30 a share. This offer came just hours after Dell had matched HP’s previous bid of $27 a share. 3Par inventors are of course cheering the news as this battle has driven stock prices up more than 20 percent.

The company did announce in a statement that it had accepted Dell’s higher bid, but this was before HP upped its own offer.

Analysts claim this bidding war is getting out of hand, driving an inflated valuation.

Kaushik Roy of Wedbush Morgan was quoted as saying his firm believes Dell and HP have better alternatives than continuing with the bidding war. In fact, he wrote a note to clients, saying: “3Par's differentiation due to its thin-provisioning technology has eroded over time. In short, we believe that 3Par is not a 'must have' asset for either Dell or H-P."

The entire situation is interesting, given that Dell had signed a deal last week with 3Par to acquire the company at $18 per share. What is driving this bidding way and why didn’t the original deal stick? It’s all about the competitive price and perhaps Dell didn’t anticipate the fight from HP.

In his blog post, TMC (News - Alert) CEO Rich Tehrani wrote that the, “Dell and H-P war over 3PAR has turned into a battle which I believe has moved beyond a fight based on the merits of the acquisition and it has become an important symbol for both computer makers that they are on the right track.”

Winning this bid has definitely moved into something much bigger than any benefit 3Par can provide and their stockholders are likely to be laughing all the way to the bank. Little worry for Dell or HP as both can afford to make the gamble.
Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.

Edited by Stefania Viscusi