HP’s deal mojo unrestrained by l’affaire Hurd
Mark Hurd, the Hewlett-Packard chief executive, turned out to be a man of hearty appetites — including for deals. Before leaving HP earlier this month under a cloud, Hurd spearheaded an M&A tear that included the purchases of 3Com, Palm, and EDS. But any bankers worried that the tech group’s appetite for deals might wane after Hurd’s departure can breathe easier.
HP’s unsolicited bid for 3PAR, unveiled on Monday, could even be taken as a sign the company’s takeover libido has been given a boost. If that were to prove sustainably the case, though, shareholders might find it troubling.
A single $1.6 billion offer by a company with a $90 billion market value is, literally, no big deal. And HP says 3PAR’s data storage technology fits perfectly into its product portfolio in the arena of cloud computing. Moreover, the tech giant can point to early successes from its 3Com purchase.
But 3PAR has been on the block for some time, and HP had looked at it before. So it’s surprising suddenly to see an unsolicited offer just a week after Dell, HP’s arch-rival in the computing business, agreed a friendly deal at the end of a competitive auction.
And there’s the question of price. Dell agreed to buy 3PAR for $18 a share. To make 3PAR think again, HP is throwing down $24 a share — more than seven times its target’s sales, and nearly two-and-a-half times what 3PAR was worth before it went on sale. HP’s delayed reaction also means 3PAR must pay Dell some $54 million if it wants to break the deal and go with HP instead.
Companies often wait to see their competitors’ cards before moving. But HP’s comportment in this process is curious. Perhaps unfairly, it leaves the impression that under Hurd the company was less eager to pay up for 3PAR — but that with the penny-pinching boss gone, more spendthrift voices are being heard.
That would be a concern for shareholders. And it could explain why muscling in on 3PAR — a small and strategically reasonable deal, albeit at a generous price — wiped nearly $2 billion off HP’s market cap.