Dell has decided that the $33 per share takeover bid that HP has submitted to 3Par is too rich for their blood at about a total of $2.4 billion and have ceded victory to HP. Judging by the number of increased bids they made while jousting with HP for control, they wanted 3Par pretty bad … so now what?
Who are the winners here … and who are the losers?
Well the winning bidder HP gets the 3Par data storage technology and the ability to expand their services into the “clouds” and offer new software and deliver products in the cloud computing environment which they obviously think will be a big money maker. It better be because the numbers suggest that HP paid way too much for this acquisition. Perhaps a billion dollars too much. At this price it’s almost 3 times 3Par’s market cap and 10 times its sales. HP must believe there’s a lot of synergy to gained here once 3Par is part of the family.
Dell on the other hand hasn’t seen much of an investor reaction to this latest “missed” opportunity. Dell’s somewhat erratic behavoiur during the last few years might have insulated their shareholders from expecting too much this time around. Dell’s shares have lost about 70% of their value in the last 10 years but now with a P/E less than 10 they didn’t change much during the takeover battle and there seemed to be a certain market indifference whether Dell would be successful or not.
Paying $2.4 billion for 3Par would have represented about 4% of Dell’s capitalization. This way they walk away with a $72 million breakup fee for being the loser. They already are sitting on about $7 billion in cash and so maybe there’s no more downside for the stock.
The biggest winner thus far has to be the 3Par shareholders whom have seen their shares zoom up from about $10 to $33 in the last 3 weeks or so while 3Par was being stalked by the two computer maker heavy hitters. Today 3Par reported that about a third of their shareholders are happy with HP’s $33 offer. Now let’s do some math here. Shareholders have gained about $23 per share over the last three weeks which works out to about a 230% gain … and only a third of the shareholders are happy. A gain like this i think is a big win.