SunGard Data Systems Inc. buys bankrupt disaster recovery services rival Comdisco Inc. ... no wait, Hewlett-Packard Co. (HP) wins the bid ... no, wait again, SunGard is the winner. The tug-of-war over the bankrupt company jerked again Friday as the U.S. Bankruptcy Court for the Northern District of Illinois denied Comdisco's request to approve HP's US$750 million offer, instead favoring SunGard's $825 million bid, according to SunGard.
"There's definitely been a lot of to-ing and fro-ing in this one," said Chris Field, a partner in the distressed-capital management firm Water Tower Capital LLC in Chicago, Illinois, and the financial advisor to Comdisco's equity committee. The equity committee, composed of Comdisco shareholders, opposed HP's purchase of Comdisco's Availability Solutions division for $75 million less than SunGard's offer. They argued successfully that HP had violated the bidding procedures outlined by the bankruptcy court.
Still, in this dogfight of a bankruptcy buyout, one more cloud hangs in the sky. The U.S. Department of Justice opposes SunGard's move to buy out its rival, citing antitrust problems. SunGard, Comdisco and IBM Corp. have a combined 80 percent of the disaster-recovery market, according to market research from Dataquest Inc.
The creditors committee of Comdisco's bondholders wanted to limit the risk involved with fighting the DOJ, taking the smaller sum offered by HP as the price to pay to avoid an antitrust suit. Comdisco's board of directors approved the HP bid last month after antitrust issues emerged. The U.S. District Court for the District of Columbia held expedited antitrust hearings for the SunGard acquisition of Comdisco last week. A ruling is expected this week, Field said.
Disaster recovery operations have taken center stage after the Sept. 11 attacks, raising the profile of companies involved. Though the threat of terrorism has hurt most sections of the economy, Comdisco is a likely beneficiary of increased concern, "as companies review what they're doing in terms of disaster recovery," Field said.