M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Friday, August 27, 2010

3Par Bidding Contest

And off they go. You'll notice that Dell is engaged in incremental bidding, while HP is jump bidding.  That's because, HP has no way of knowing what Dell's private valuation of 3Par is so it's trying to use a version of "shock and awe" to knock Dell out of the bidding.  Dell, on the other hand, is confident that it will always have the last look, so it need do no more than add $0.10 to HP's last bid.   A week ago, this company was trading for about $9/share.  Last bid was $30 a bid.- something like $2 billion.  I suppose it's only money.

The Lex Column at the FT has this just about right:

Few things inspire a loss of rationality quite so much as the fear of missing out. The phenomenon is apparent around buffet tables, in one-day sales, and now in the pursuit of computer storage company 3Par.

...

Hypothetically matching HP’s latest $1.8bn offer, Dell would have to generate profits after tax of $180m from 3Par in order to make a respectable return of, say, 10 per cent in five years. At Dell’s current 29 per cent tax rate, that would require 2015 revenues of $1.2bn: a sixfold sales increase in five years, not to mention spectacular profitability. Who needs rationality when desperation and blind optimism conspire so well?

-bjmq

BTW:  The Deal Professor has an excellent post on this bidding contest and matching rights that you should read if you haven't already.

 

3Par Bid



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