3Par and Hewlett’s Hunger for Acquisitions

Hewlett’s Hunger For Acquisitions

Mark Hurd turned out to be a man of hearty appetites — including one for deals. Before resigning as Hewlett-Packard’s chief executive this month under a cloud, Mr. Hurd led a mergers and acquisitions tear that included the purchases of 3Com, Palm, and Electronic Data Systems. But any bankers worried that the tech group’s lust for deals might wane after his departure can breathe easier.

H.P.’s unsolicited bid for 3Par, announced 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 H.P. 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. So it’s surprising suddenly to see an unsolicited offer just a week after Dell, H.P.’s archrival, agreed to 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, H.P. 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. H.P.’s delayed reaction also means 3Par must pay Dell $54 million if it wants to go with H.P. instead.

Companies often wait to see their competitors’ cards before moving. But H.P.’s comportment in this process is curious. Perhaps unfairly, it leaves the impression that under Mr. 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 H.P.’s market cap.

A Tax on Mining

Nature may abhor a vacuum, but Australia needn’t. The country’s first hung Parliament in 70 years should not frighten investors. The bad news is that a proposed “supertax” on mining, despite its appealing logic, may not survive the political wrangling.

Two days after votes were cast, Prime Minister Julia Gillard’s incumbent Labor Party looks likely to emerge three seats short of a majority in the 150-seat lower house. Australia’s benchmark index has barely budged, and the Aussie dollar has risen slightly. The reason? The economy needs little work. Unemployment is probably as low as it can go, and debt is a meager 6 percent of gross domestic product.

Ms. Gillard must now woo the stragglers, likely to include one Green lawmaker and three independents. With little to play for in terms of economic policy, the bulk of the horse trading will revolve around secondary issues like broadband access in rural areas, water usage and carbon trading.

But the biggest bargaining chip looks to be the proposed mining tax, which would raise an estimated 10.5 billion Australian dollars ($8.94 billion) in two years by applying a levy to mining profits. The opposition National Liberal Coalition is unambiguously against the tax. Labor is in favor, though Ms. Gillard has already watered down the proposal inherited from her ousted predecessor, Kevin Rudd, by cutting the headline rate to 30 percent from 40 percent.

Taxing mining profits rather than levying fixed rents on production, as happens now, is a good idea. It would make the good times less good, but the bad times less bad. It would also capture some of the gains that commodity producers have earned as a result of easy money disgorged by governments, which has helped to push up prices.

While it is too early to call, the odds of independent candidates, who represent rural areas, backing the tax as it stands look slim. That would be a shame. Mining’s contribution to Australia’s economy is easy to overstate — it generates 6.7 percent of the country’s G.D.P. but accounts for just 3 percent of jobs. Yet measured by gross profit margins, it is by far the country’s most profitable industry. If the tax is dumped, the mine operators — not Australia — will have won.

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