6 Possible Suitors In The Storage Wars: Behind The Scenes Of HPE's $1B Plan To Acquire Nimble Storage

How HPE Landed Nimble Storage

What you may not know about Hewlett Packard Enterprise's bid to buy Nimble Storage for $1 billion in cash is that HPE was pitted against six other firms by the upstart developer of all-flash and hybrid flash storage systems and related technologies.

Nimble, for a brief moment, was worth $2.2 billion, but that value would erode as its sales projections changed and it kicked off a search for a buyer in 2016. Nimble, confident it could fetch something close to its post-IPO value, would cast a wide net to see what it could catch.

HPE, meanwhile, needed Nimble's technology to give it a full range of flash storage systems for SMB to large enterprise clients and help it better compete in the fast-growing all-flash storage market.

Details of how the wheeling and dealing started, and how the final agreement was nailed down, are included in one of Nimble Storage's last SEC filings as an independent company. But instead of reading through all that legalese, CRN presents the highlights in a special timeline that takes you through the art of this deal.

Winter 2013 – IPO And Keeping Up Expectations

Friday the 13th was a lucky day for Nimble Storage; the company saw its share price soar by over 50 percent on the day of its IPO. Nimble Storage, trading on the Nasdaq exchange under the symbol "NMBL," raised $168 million in one of the most successful IPOs of 2013 with an opening share price of $31.49. That valued the company at over $2.2 billion.

Near the close of trading on its first day as a public company, Nimble's share price was up nearly 60 percent. But on November 20, when Nimble Storage reported third fiscal quarter financials that were below expectations, its stock price fell fast, dropping 51 percent in one day. That pattern would repeat and by February 16, 2016, Nimble traded as low as $5.73 per share.

Summer 2016 – HPE Meets Nimble

Nimble Storage CEO Suresh Vasudevan (pictured) in early Summer of 2016 held informal discussions with Manish Goel, then the general manager of HPE's storage. No formal proposals were made. The meeting was reported to Nimble Storage's board of directors on August 18.

What Vasudevan and Goel discussed was not detailed in Nimble's SEC filings, but it was the start of a long courtship between the two companies.

Fall 2016 – "Party A" Enters The Picture

According to SEC filings, the competition for Nimble was just beginning.

An unnamed person from a company referred to by Nimble Storage as "Party A" reached out to an unnamed Nimble Storage employee to discuss a potential strategic transaction. At about the same time, an unnamed investment banker called Vasudevan to say that Party A was interested in exploring a strategic investment or acquisition in the storage industry, with Nimble Storage a potential target.

Preliminary discussions between Party A and Nimble Storage started in early November 2016.

Winter 2016 – Is HPE Interested?

Rumors had been floating since at least 2015 that Nimble Storage was a potential acquisition target of a number of IT vendors including Cisco Systems, EMC, HPE, and NetApp.

Anup Singh, Nimble Storage CFO, discussed with Goldman Sachs, which had at the time recently advised HPE about two other strategic transactions, about whether HPE might be interested in a possible strategic transaction with Nimble Storage. At about the same time, Vasudevan also contacted Goel (pictured), who then introduced Vasudevan to Vishal Bhagwati, HPE's senior vice president of corporate development.

Now the timeline gets a bit tighter, with a lot more day-to-day action.

November 14, 2016 – Goldman Sachs Hosts Call With HPE And Nimble

Goldman Sachs representatives held a call with Vasudevan and Singh to discuss a potential strategic transaction between the two companies. Before this meeting, the two entered into a mutual non-disclosure agreement to share non-public information.

That day also saw Bhagwati meet with Vasudevan to discuss the two companies' strategic fit.

November 17, 2016 – Nimble Storage's Board Discusses The Possibilities

The Nimble Storage board of directors held a regularly scheduled meeting, and privately discussed the chances of being acquired. Vasudevan told the board about Nimble Storage's recent contacts with HPE and Party A, leading to a discussion about whether it would be appropriate to investigate such a potential strategic transaction.

The board of directors established a sub-committee consisting of Jim Goetz and Jerry Kennelly to advise management on this preliminary exploration but did not authorize them to proceed with any specific opportunity.

HPE and Nimble Storage signed a mutual non-disclosure agreement. Four days later, members of Nimble Storage's management team met with representatives of HPE's business and corporate development teams to discuss a possible strategic transaction between the two companies.

November 22, 2016 – Nimble Shares Slip

Investors retreated after Nimble Storage unveiled preliminary third fiscal quarter 2017 results which were in line with prior guidance, and unveiled its fourth quarter guidance.

Nimble Storage's share price fell about 16 percent to $7.77 per share that week.

At about this time, Nimble provided certain non-public information to HPE.

December 9, 2016 – NDA With Party A

Nimble Storage and Party A entered into a non-disclosure agreement, and some members of Nimble's technical team met with representatives of Party A in an all-day session. Party A told Nimble storage that it would be further evaluating any potential strategic transaction given Party A’s anticipated future direction and prospects.

That day also saw Goldman Sachs meet with Vasudevan, Singh, and Varun Mehta, Nimble Storage's founder and vice president of product operations, to discuss the potential strategic transaction with HPE and other companies that may have an interest in a deal with Nimble Storage.

December 15, 2016 – Nimble And HPE Meet Again, Talk Acquisition

Nimble Storage and HPE executives met to look at Nimble's product and technology architecture. That resulted in HPE expressing continued interest in pursuing a possible acquisition of Nimble Storage.

In late January, HPE followed up with a message to Vasudevan of its continued interest in such an acquisition.

Late December 2016 – Party A Drops Out

Party A told Sing that the company was undergoing a big management and strategic focus change, and would no longer pursue an acquisition of Nimble Storage. That was the last discussion between Party A and Nimble Storage.

January 31, 2017 – HPE Makes An Offer

HPE's Bhagwati sent Nimble Storage's Vasudevan a non-binding proposal under which HPE would acquire all Nimble Storage's outstanding share at an indicative price $10.50 per share, or a 23-percent premium over the previous day's share price of $8.51. "Indicative price" is defined as a quote for a security that is not firm or binding. That proposal was subject to Nimble Storage agreeing to negotiate exclusively with HPE on an acquisition.

Vasudevan called the offer inadequate and said Nimble Storage's board of directors would be interested in a deal priced at $14.00 to $15.00 per share.

February 1, 2017 – HPE Ups Its Offer; Nimble Talks With "Party B"

Bhagwati verbally told Vasudevan that HPE would be willing to increase its offer to $11.75 per share.

At the same time, Vasudevan told Goldman Sachs to reach out to a company, "Party B," to see if it would be interested in discussing a strategic transaction between the two. Vasudevan and other members of Nimble Storage's management team met with members of Party B’s management team to discuss a potential strategic transaction. However, Party B said on-premises storage was not one of its priorities, but it would consider the possibilities.

February 2, 2017 – HPE's Offer Is Discussed; "Party C" is Called

Nimble Storage's board of directors met with management and the company's legal advisors to discuss HPE's January 31 proposal, followed by a discussion of the possible risks of remaining a stand-alone company even as the storage industry moves through a period of increased competition and consolidation.

The board of directors then discussed how to determine if other potential acquirers might be approached before agreeing to exclusive discussions with HPE.

Vasudevan updated the board on the prior day's meeting with Party B. Also, board member B.J. Jenkins told the board that he had reached out to a senior executive at a company referred to as "Party C," but that Party C had a low level of interest in the acquisition because of its strategic focus on cloud-based storage.

The board of directors told Vasudevan to tell HPE that its offer was inadequate, and gave him authority to negotiate with HPE over a higher purchase price, and said it would agree to exclusive negotiations with HPE if needed to get a better offer.

February 2 and February 3, 2017 – Pricing Talks Heat Up; Nimble Reaches Out to "Party D" and "Party E"

Goldman Sachs was asked by the board of directors to reach out again to Party B, and contacted two other companies, "Party D" and "Party E, that might be interested in a strategic transaction with Nimble Storage. Neither company was interested in pursuing such a deal.

Vasudevan also had several rounds of negotiations with Bhagwati discussing the price, and on February 3 HPE's representatives said the company could pay $12.00 per share for Nimble Storage. Vasudevan responded that Nimble Storage would need a price closer to $14.00 per share. HPE later that day verbally confirmed a "best and final offer" of $12.50 per share, or about a 48 percent premium over Nimble's February 2 share price. Bhagwati also told Vasudevan that HPE would require a 30-day exclusivity agreement on acquisition discussions.

February 4, 2017 – Zeroing In On An HPE Deal

Nimble's board of directors and management met with Goldman Sachs and the company's legal representatives to review HPE's letter of intent and to review HPE's $12.50-per-share offer. Goldman Sachs said it had confirmed that Party B, Party D, and Party E were not interested in a strategic transaction with Nimble Storage. Jenkins said the same about Party C.

Goldman Sachs then raised the possibility of discussions with other companies, in particular, one referred to as "Party F." However, Goldman Sachs said, Party F would not be able to quickly negotiate such a deal give its cash position at the time. The board agreed to not reach out to Party F. Vasudevan also said Party A informed the board in early January that it could not pursue an acquisition of Nimble Storage because of its change in focus.

Nimble's board of directors approved HPE's letter of intent containing the price per share of $12.50. After the meeting, Vasudevan contacted Bhagwati to tell him Nimble Storage would move forward with negotiations.

February 5 to February 15, 2017 – Due Diligence Meetings

HPE on February 5 provided a due diligence request list to Nimble Storage, which responded on February 8 with access to non-public information. For the following week, Nimble Storage and HPE representatives held several due diligence meetings about Nimble Storage's technology, business, and finances. Those meetings were capped on February 15 with a draft merger agreement which includes a termination fee of 3.8 percent of Nimble Storage's equity value it would pay HPE should it accept another acquisition offer.

February 16, 2017 – Nimble's Board Meets

Nimble Storage's board of directors met to review the company's fourth fiscal quarter and the annual operating plan for the fiscal year 2018. Afterward, the board met with Goldman Sachs and its legal counsel to discuss the Goldman Sachs' preliminary financial analysis of an acquisition priced at $12.50 per share, and whether that was indeed the highest price HPE would offer.

February 28, 2017 – Agreement Almost Reached

After over a week of revising and passing back and forth possible letters of intent, Bhagwati countersigned and returned the price confirmation letter to Goldman Sachs to confirm HPE's intent to complete the acquisition at a price per share at least equal to $12.50. Vasudevan said it was important to Nimble Storage that the deal is announced before the start of trading on March 7, 2017, which was when it had scheduled a conference call to discuss financials for its fourth fiscal quarter 2016, which ended January 31.

March 6, 2017 – Final Agreement Reached

After several days of negotiations, including finalizing the proposed termination fee at 2.9 percent of Nimble Storage's equity value, HPE's board of directors formally approved the acquisition of Nimble Storage by a unanimous vote of the directors present at the meeting.

Later that day, Nimble Storage's board of directors, after a final review of the terms, also unanimously decided to approve and declare advisable the proposed acquisition by HPE and recommend that its shareholders tender all their shares to HPE.

Representatives of HPE and Nimble Storage then signed the agreement.

March 7, 2017 – Done!

HPE early that morning issued a press release, and Nimble Storage issued a public statement, to unveil HPE's proposed acquisition of Nimble Storage for $1 billion in cash.