HP's Palm bid beat Apple, Google, RIM, says report
Wooing worthy of a soap opera
HP was not Palm's only suitor when the Prē and Pixi punter offered itself for sale — Apple, Google, and RIM were also seeking the hand of the smartphone maker, presumably attracted by its webOS dowry and its patent portfolio. Nokia wasn't.
This tidbit comes from the Business Insider, citing "a source familiar with the negotiations" whose revelations parallel the information released by Palm in a May SEC filing detailing its availability.
In that filing, Palm revealed that it was "in contact with a total of 16 companies including HP" about either a full-scale acquisition or the purchase of all or part of Palm's intellectual property.
In the filing, only HP's name is used. The other four companies who engaged in substantive discussions are referred to as as Company A, Company B, and so on:
The two companies in addition to HP that presented acquisition proposals are referred to as Company A and Company B. A fourth company, referred to as Company C, had initially been in discussions with Palm regarding an intellectual property transaction and later made a proposal to acquire Palm.
A fifth company, referred to as Company D, contacted Palm on March 18 to discuss an intellectual property transaction but did not make a proposal to acquire Palm. Company D did not enter into a nondisclosure agreement and did not review non-public information about Palm. Discussions with Company D continued intermittently until April 15.
Business Insider identifies Company A as Apple; Company B, Lenovo (no mention was made of a boogie-woogie bugle boy); Company C, RIM; and Company D, Google. Nokia did not join the party — a decision BI characterizes as "bizarre".
Company A — Apple, if BI is correct — was primarily interested in Palm's IP, but BI's source claims that had their bid been successful, Cupertino "seemed committed" to continuing to fund Palm's operations, "perhaps" to be able to compete for keyboard-loving RIM customers.
Company A(pple) made an initial offer of $600m "with the value being increased by the amount of Palm’s cash but reduced by the amount of debt and certain other liabilities." However, Palm decided that "the Company A proposal would result in minimal or zero value to Palm's common stockholders" due to their having received an offer from HP for $4.75 per share. After being told of that decision, "Company A did not subsequently revise its proposal."
Company B — Lenovo — wanted a stock-for-stock transaction, but Palm's SEC filing noted that such a deal "would take at least several months longer to close than is customary would involve unacceptable risks."
Company C — RIM — first proposed acquiring Palm in a cash deal of $6 to $7 per share, significantly above HP's $4.75. HP then upped its bid to $5 per share — and shortly thereafter RIM dropped its bid to $5.50 per share.
Then RIM stumbled by delivering to Palm a "markup" to its proposal:
This markup raised several concerns, including (i) closing conditions that could have put the transaction at greater than customary risk based on events that could occur between signing and closing, (ii) revised governance provisions that would have eliminated the separate vote of the holders of Palm common stock not affiliated with Elevation [Partners LLC, a major Palm stockholder], and (iii) a termination fee of $60 million payable under certain circumstances, including if the merger agreement were terminated in response to a superior proposal.
The next day, Palm told HP that to stay in running it needed to "improve its offer significantly and immediately." Later that same day, HP boosted its bid to $5.70 per share. When informed of HP's bid, "Company C reaffirmed its previous bid and declined to revise its positions," but offered $800m for a nonexclusive license to webOS and the acquisition of "certain patents".
Palm turned them down, and a few days later they and HP announced their $1.2bn deal. As BI's source put it, RIM "had to work incredibly hard to blow it." But they succeeded.
Now Palm is in HP's stable — and although it's widely assumed that the deal was made for webOS, it remains unclear as to where that operating system will be used: smartphones, tablets, settop boxes, IP TVs, printers, all of the above, whatever.
For example, when the Palm deal was completed early this month, Todd Bradley, HP's executive vice president of the Personal Systems Group, said: "This allows us the opportunity to fully engage in growing our smartphone family offering and the footprint of webOS." And, indeed, Palm is still designing phones.
From where we sit, Palm selected the most suitable swain. HP has pockets deep enough to build webOS a happy home — multiple homes in multiple devices, in fact.
Palm's other suitors, to be sure, also had the wherewithal to have and to hold Palm in sickness and in health — but we fear their intentions may not have been so honorable. ®