3PAR had three suitors
It approached a fourth
Comment It's been the 3PAR bid shuffle; the company has been seeking to sell itself since early May and three potential acquirers were involved: Dell; HP and one other.
SEC filings by both 3PAR and Dell outline a timeline of events leading up to the agreed offer by Dell to buy 3PAR. First of all, Dell and 3PAR had discussions around a reseller deal in late 2009 and early 2010, presumably about Dell reselling 3PA's InServ arrays. They came to naught. Then David Scott, 3PAR's CEO, talked to an unidentified company (Company A) informally on May 3. They agreed to have follow-up discussions but these never took place. Four days later Scott talked to Michael Dell and Dave Johnson, Dell's SVP for corporate strategy, again on an informal basis. Things looked good and they decided to think more about a Dell-3PAR relationship.
Knock knock. Who's there? HP
On July 8 3PAR says that Company B, believed to be HP, came knocking on 3AR's door and said it wanted to explore an acquisition. Things looked good and a mutual non-disclosure agreement was set-up between the two companies on July 13. There were meetings over the next two days and Company B (HP) said it would make a bid in the near-term. Scott met with Company B's CEO on July 1 and he (Mark Hurd we believe) expressed Company B's seriousness about acquiring 3PAR.
On July 15 3PAR's board met with its legal eagles, Wilson Sonsini Goodrich and Rosati, to consider company B's intentions. Scott "summarised the discussions that the senior management team had over the past several months with various companies regarding a possible transaction, as well as the meetings with Company B." So 3PAR had been more or less shopping itself for some time but, up to this point, only discussions with Companies A and B (HP) had been at all fruitful. Company B wanted: "to proceed expeditiously with a possible acquisition."
The 3PAR board authorised talks with Qatalyst Partners about it being 3PAR's financial advisor for this acquisition process, Qatalyst having been active in the EMC-DAta Domain acquisition. Qatalyst and the board discussed acquisition matters and potential bidders. The board: "directed Qatalyst to approach two other companies that … were the most likely to be interested in, and capable of, acquiring 3PAR in order to ascertain their interest ." These were Dell and company A. The board decided not to approach any other companies because news that it was shopping itself might harm its business.
A board transaction team was set up to deal with Company B.
Confidentialty deals and HP's first bid
Next day, July 16, Scott contacted Dell and Company A. Both said they would be interested in an acquisition of 3PAR. 3PAR and Dell entered into a confidentiality agreement on July 17. At this point we have three potential bidders: HP; DEll; and company A. Scott met with the Transaction Team and Qatalyst, and Qatalyst was authorised to contact a fourth potential bidder, Company C. It's CEO said he/she wasn't interested.
3PAR entered into a confidentiality agreement with Company A on July 19.
Now the pace of events speeded up. Discussions between Dell and 3PAR took place on July 22 and 23. On the latter day Company B sent 3PAR "a non-binding indication of interest" in an acquisition subject to due diligence and an agreement "to negotiate exclusively with Company B for three weeks." A proposed bid price was indicated in this communication.
3PAR and Qatalyst discussed this on July 27 and 3PAR's board "determined to reject Company B's July 23rd indication of interest, but authorised" continued "discussions with Company B, as well as Dell and Company A, regarding a potential acquisition of 3PAR."
Company A then withdrew on July 29. Dell and 3PAR executives met on July 30 and Dell gave 3PAR a preliminary and non-binding declaration of interest based on a $15 - $17/share bid, subject due diligence and exclusive negotiations lasting two weeks. Qatalyst and Dell's financial advisors, Credit Suisse, talked on the next day and it was agreed that the bid price would be upped to $18/share, which was higher than Company B's proposed price, to gain the exclusive negotiations required by Dell.
HP's decision time 1 - no go
Qatalyst met Company B on Saturday, July 31, and said it needed to raise its bid above its July 23 indication of interest amount. We can assume that Qatalyst said Company B would have to get to more than $18/share. Company B said no on Sunday, August 1, and 3PAR agreed the Dell exclusivity deal on that same day, running through to August 15.
Due diligence meetings took place in these two weeks and coincidentally, Mark Hurd resigned as HP CEO on August 6. In the Dell and 3PAR talks a termination fee of 4.25 per cent was agreed. Michael Dell and David Scott reviewed progress on August 10. The merger agreement was finalised on August 15 and the acquisition announced on August 16.
HP's decision time 2 - go go go
So, everything was done and dusted - except that HP decided to re-enter the game and make a hostile bid on August 23, with a substantially increased offer of $24/share, totalling $1.6bn compared to Dell's $1.13bn. Our understanding is that Dell is now preparing a counter bid, possibly in the $20/share area. A headless HP has made a decisive re-entry into the bidding race for 3PAR and Qatalyst partners now has the circumstances it needs to get as high a valuation of Dell as it can, engaging in a bid price shuffle dance, exchanging partners and testing price proposals in a what has become a 3PAR auction.
The identity of Companies A, B and C have not been revealed. Based on HP's admission of talks with 3PAR preceding the Dell bid and of it increasing its offer than it is almost certain that HP is Company B. Who are Companies A and C? We might assume the possibilities include Oracle and Cisco. HDS invents its own storage and has a new USP-V system due out in the next month or two. IBM has already bought its cloudy high-end storage in the form of XIV. Oracle has the Sun 7000 line but that isn't generally regarded as enterprise class. NetApp invents its own storage architectures and it's generally thought it has a new high end box, a FAS7000 or FAS8000 coming out soon. We can see two other possibilities in the shape of Fujitsu and NEC, but our money is that Oracle was Company A whilst Cisco was Company C. ®