Wednesday, August 20, 2014
Inquirer Daily News

H-P's bid for 3Par amounts to $2.8 million per employee

Not that the workers themselves will get that kind of money, but it's a lot higher than some of the high-profile deals involving Philadelphia-area companies.

H-P's bid for 3Par amounts to $2.8 million per employee

The bidding war over a company most of us had never heard of produced a statistic that caught my attention last week.

3Par Inc. is a Fremont, Calif., company that’s involved in the white-hot business of cloud computing. Since reaching a deal to be acquired by Dell Inc. for $18 on Aug. 15, 3Par has become the object of Hewlett-Packard Co.’s desire.

There are lots of ways to describe what an acquisition is worth. Often, it’s in terms of total dollar amount. For example, Dell’s first offer for 3Par was worth $1.13 billion.

When public companies are involved, that total can get expressed as a price per share. Dell’s initial $18-per-share offer was 87 percent higher than the $9.65 3Par shares closed at on Aug. 13.

Another way to express the value of a deal is to look at the acquisition price per employee. After all, many companies say their greatest asset is their workforce.

Well, thanks to offers and counteroffers by H-P and Dell over the last two weeks, 3Par employees should be heartened that the computing giants value them at $2.8 million apiece. That’s based on the $30-per-share offer made by H-P on Friday. And it’s a lot more than the $1.68 million per employee Dell had originally agreed to.

It got me to wondering about purchase price-per-employee calculations for some high-profile transactions involving Philadelphia companies.

Dow Chemical Co. bought Rohm & Haas Co. for $15.4 billion in cash in April 2009. The Philadelphia-based Rohm & Haas had 15,490 employees as of Dec. 31, 2008. That works out to $995,500 per employee.

In an even bigger transaction, Pfizer Inc. paid $68 billion in 2009 for Wyeth, which had major operations in the Philadelphia suburbs. Wyeth had 47,426 employees worldwide at the end of 2008. Thus, Pfizer paid $1.43 million per employee.

Allentown-based Air Products & Chemicals Inc. is trying to acquire Radnor-based Airgas Inc. for $63.50 per share, or $5.3 billion. Based on Airgas’ 14,000 employees as of March 31, that would amount to $379,489 per employee.

As this is a hostile deal, Airgas’ management believes that Air Products’ bid greatly undervalues the specialty and medical-gas distribution company. So far, the market agrees. Airgas shares closed Monday at $66.38, up 34 cents. Thus, the market “values” its workforce at $396,671 per employee.

Even Comcast Corp.’s $30 billion offer for control of NBC Universal Inc. doesn’t approach 3Par territory. NBC Universal has about 15,000 employees. That means Comcast is paying $2 million per employee.

Far from trivia, financial metrics based on employees are widely watched because labor tends to be the biggest cost companies have. One of the most common is revenue or sales per employee. Companies track it as a measure of productivity against their peers. The figure can also help businesses plan how many employees they will need for various stages of their growth.

Still, purchase price per employee is more ethereal. You can’t take it to the bank. H-P is not going to write checks for $2.8 million to each 3Par employee. The shareholders - some of whom will be 3Par employees - will wind up with the cash.

But being a million-dollar employee makes for good Labor Day backyard barbecue conversation.
 

Mike Armstrong Inquirer Columnist
About this blog
Mike Armstrong blogs about Philadelphia corporations and business-related topics. Contact him at 215-854-2980. Reach Mike at marmstrong@phillynews.com.

Mike Armstrong Inquirer Columnist
Business Videos:
Also on Philly.com:
Stay Connected