Dell, 3PAR & HP: A Par Five Bidding War (DELL, PAR, HPQ)

They don’t call it a bidding was no reason at all.  Dell Inc. (NASDAQ: DELL) has just raised its offer for 3PAR, Inc. (NYSE: PAR) again.  After Dell went to $24.30, Hewlett-Packard Company (NYSE: HPQ) went to $27.00.  Rather than trumping HP with a higher bid, Dell is matching the $27.00 offer.

The most interesting aspect of this bid is that 3PAR was deemed an expensive acquisition at $18.00 per share.  That was Dell’s original offer.  Then HP offered $24.00 as the second offer.  The third offer came from Dell at $24.30.  The fourth offer came from HP at $27.00.  This Dell match at $27.00 now makes the fifth bid.

Here was the valuation on a standalone basis at $1.7 billion:  3PAR cannot be compared on its own to what the sales and earnings might be if it was a unit of one of these much larger destinations in technology.  Whatever that value is, it better be multiples of what the stock value was on its own.  3PAR earnings estimates are $0.15 EPS for Fiscal March-2011 and $0.27 EPS for March-2012.  The 2011 and 2012 revenue estimates are $235.3 million and $278.3 million, respectively.  At this rate, the forward P/E ratios on a standalone basis are 180 for next year and 100 for 2012.  The market cap of almost $1.7 billion generates multiples on revenues of 7.2 for 2011 and 6.1 for 2012.

3PAR shares were trading north of $28.00 in early indications this morning.  The rationale is simple enough.  If you want it bad enough at $27.00, then why not $28.  Or higher.

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JON C. OGG