When the news officially broke that HP had put in a winning bid for Palm, it all seemed so simple. HP, a company that has long had its smartphone ambitions beset by poor hardware and execution, seemed to simply be the only company that was really intent on purchasing the troubled company based in Sunnyvale. But according to a recent SEC filing from Palm, what really took place in weeks leading up to HP’s successful bid was a five company bidding war. Click through to get all the facts straight from the horse’s mouth.
On February 17th, Palm CEO John Rubinstein put together a committee charged with investigating what options were at Palm’s disposal. The committee looked into scenarios which included the outright sale of the company, selling all of its IP, and licensing the rights to webOS. Then on the 25th of February — the very same day it slashed its guidance numbers — Palm began talking to 16 companies to gauge their interest in a potential buyout. Of those 16, only 5 entertained the possibility of a deal. HP was one of those companies. In the SEC filing, the names of the four others were withheld and were referred to as Companies A, B, C, and D. Companies A and B as well as HP were interested in the outright acquisition of Palm, while Companies C and D were merely interested in buying its patents. D shortly dropped out of contention for reasons unknown.
As early as March, and with four potential suitors, Palm’s board had concluded it would be best to sell the entire company. The reason for this was that Palm feared backlash for investors as any other deal could easily have devalued the value of its IP. Discussions with the four companies continued. On March 19th, Palm’s stock was devalued to $0 the day after it announced its Q3 2010 results. Four weeks later, April 13th, HP entered a bid of $4.75 per share. Two days later Company A entered a bid of $600 million, while Company C tested the waters with a stock offer. With three potential offers on the table, Palm instructed HP to up the ante. HP refused, but to its luck, Companies A and B withdrew their bids.
Company C entered a new bid worth $6 to $7 per share on April 18th. The next day, Palm sent it and HP draft merger agreements. The 20th and 21st of April saw Palm and HP try and hammer out a deal. On the 22nd, HP raised its offer to $5 per share. Company C, for whatever reason, dropped its offer to $5.50 per share on the same day and asked Palm to agree it would pay a $60 million penalty if they agreed upon a deal only to see it fall through. For the next three days, Palm and Company C tried to resolve their differences to no avail. While the two were in talks, HP raised its bid by 70¢ per share. Company C was warned that if it did not match the bid, all discussion would end. Company C countered with $800 million in exchange for all of Palm’s IP. Palm refused, and Company C walked. From that point on, it took HP and Palm until the 28th of April to get to the point where both companies would put ink to paper.
That, friends, is how Palm was acquired by HP. As we mentioned earlier, the identities of Companies A through D remain a secret, although we think we know how four of them are are: Dell, Huawei, HTC, and Lenovo.