Palm said HP beat out four other companies in a bidding war that stretched for nearly two months, according to an SEC filing submitted by the company.
From Feb. 25 to April 1, Palm and its financial advisers were in contact with 16 companies about a possible merger. Of these companies, which included HP, six decided to move forward with meetings where Palm disclosed non-public information about its financial projects and operating data.
After these meetings, Palm’s financial advisors sent HP and two other companies, referred to in the filing as Company A and Company B, paperwork detailing how they could move forward with acquisition plans.
Each of the companies presented preliminary proposals to acquire Palm. A fourth company, referred to a Company C, already had been in discussions with Palm about a sale of its intellectual property rights and later filed a proposal to buy the company outright.
A fifth company, referred to as Company D, contacted Palm on March 18 to discuss a sale of Palm’s intellectual property rights but did not propose a purchase of Palm in its entirety.
Palm’s financial advisors recommended the company dismiss offers for its patent portfolio in favor of selling the company outright.
Palm then moved ahead with negotiations, meeting with HP, Company A and Company B in a series of separate meetings held from March 19 to March 26.
Company C continued to pursue a sale of Palm’s patent rights “on several occasions in April.” Palm maintained that it favored an outright sale of the company and Company C later said it was interested in buying the entire company.
HP was the first to submit a formal offer to buy Palm. On April 13, HP offered to buy the company for $4.75 per share. Bloomberg records indicate Palm’s stock traded at $5.16 per share that day but plummeted to $4.63 later that month.
Two days later, Company B offered to buy Palm in a stock-for-stock transaction but “did not specify the value of the proposed consideration.” The next day, Company A offered to buy Palm for $600 million in cash.
Palm decided that Company A’s offer was “not competitive” and would leave its shareholders empty handed. Company A did not raise its bid.
Palm also dismissed Company B’s bid because of the time delays and uncertainties surrounding the offer. Palm asked the company to submit an offer that “could be valued currently and that could be completed within a customary timeframe” but the company did not revise its proposal.
On April 18, Company C offered to buy Palm for between $6 and $7 per share if Palm agreed to the transaction within 14 days. Palm sent draft merger agreements to Company C and HP the next day.
Palm, Company C and their counsel engaged in extensive negotiations from April 23 to April 25 but were unable to reach a satisfactory resolution of the issues raised by the Company C markup.
During this time, Palm told HP that it had to “improve its offer significantly and immediately.” HP raised its offer to $5.70 per share.
Palm then told Company C it had another potential buyer. Company C reaffirmed its previous bid and declined to revise its positions on the open merger agreement issues but did propose an alternative transaction under which it would acquire certain patents and take a nonexclusive license to Palm webOS in exchange for a one-time cash payment of $800 million.
Palm’s financial advisors found “the intellectual property transaction was substantially less desirable to Palm’s stockholders than an outright sale” and directed the company to focus on the HP proposal.
After four days of “extensive” negotiations, Palm financial advisor Goldman Sachs recommended the company accept HP’s bid of $5.70 per share. The $1.2 billion merger was announced later that day.