HP fended off four suitors for Palm in bidding war

Hewlett-Packard fended off four rivals during a bidding war to secure its $1.2 billion acquisition of smartphone maker Palm (NASDAQ: PALM), according to a proxy statement filed with the U.S. Securities and Exchange Commission.

The tale of HP's acquisition of Palm, as detailed in the proxy statement, is a twisting one. Beginning in February, Palm began to realize that its options were limited, and on Feb. 17, the company formed a committee led by CEO Jon Rubinstein to look at its options, including licensing the webOS operating system or selling the company. Between Feb. 25 and April 1, Palm talked to a total of 16 companies about a deal. Palm's board decided in early March that it was going to sell the company and not license webOS. However, Rubinstein was saying as late as April 22 that he remained open to licensing webOS.

HP is the only suitor publicly named in the statement; the others are referred to as Company A, B, C and D. According to the statement, Company A and Company B made bids for Palm. Company C had initially only wanted Palm's intellectual property, but later made an offer. Company D had only wanted Palm's intellectual property, and did not enter into a nondisclosure agreement with Palm or review non-public information about Palm.

On April 13, HP made an offer for $4.75 per share, roughly $1 billion cash. Then, on April 18, Company C made an offer for between $6 and $7 per share, and Palm sent both HP and Company C draft merger agreements.

Then the bidding war started to get interesting. HP boosted its offer to $5 per share and Company C lowered its offer to $5.50 per share. Company's C offer also had several provisions that worried Palm, including a $60 million penalty if the deal fell apart. Palm and Company C never managed to come to an agreement during negotiations. While this was going on, Rubinstein and his advisors told HP that the company needed to "significantly and immediately" improve its offer. HP did so, and raised its offer to $5.70 per share on April 24--the winning bid. Company C made a last-ditch pitch to Palm, and offered to purchase patents and take a nonexclusive license for webOS for $800 million, which Palm's board declined. Palm and HP announced the deal April 29.

The most interesting questions now revolve around the other mysterious bidders for Palm that were not identified. Dell, HTC, Huawei and Lenovo were bandied about as serious contenders in the run-up to HP's winning bid.

For more:
- see this Engadget post
- see this AllThingsD post
- see this ZDNet post

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