Data Domain Accepts NetApp's Revised Offer

Data Domain has again agreed to be acquired by NetApp, and made it clear that it isn't interested in being acquired by EMC. But the company's board claims it is reviewing EMC's offer.

NetApp and Data Domain issued a joint statement late Wednesday that they have entered into a revised acquisition agreement at the new price of $30 per share, which NetApp offered to match a bid made by EMC earlier this week. The deal is valued at around $1.9 billion.

Dan Warmenhoven, chairman and CEO of NetApp, said in the statmenent: "We are excited about this great opportunity for NetApp and Data Domain. The synergies between our two companies will enable us to accelerate growth and market adoption more so than as separate entities. This partnership will create meaningful benefits for our global customers."

Frank Slootman, president and CEO of Data Domain, said: "We are pleased with the revised terms of NetApp's acquisition offer and feel it will provide great value to our shareholders and customers."

The companies noted that the deal has been unanimously approved by Data Domain's board and is expected to close in 60 to 110 days, subject to regulatory approval.

Under the agreement, Data Domain stockholders will get $16.45 in cash plus shares of NetApp common stock. The amount of NetApp stock per share of Data Domain stock can range from 0.7783 shares to 0.6370 shares, depending on the "closing average" of NetApp's stock "for the 10 most recent consecutive trading days ending on the third trading day immediately prior to the closing of the first-step merger," the companies said.

Data Domain, which is best known for storage systems featuring popular data deduplication technology, never issued a public response to EMC's offer on Monday, and so far hasn't commented on why it feels more comfortable with NetApp rather than with EMC, the storage industry leader. EMC had argued that it could do a better job of expanding sales of Data Domain's product line with its larger customer base and sales force.

But analysts noted that there was greater product overlap between Data Domain's and EMC's product lines than with NetApp's products, and that there might be a better cultural fit in combining Data Domain and NetApp.

The question that remains unanswered at the moment is whether EMC will come back with a counter offer, either in a serious effort to acquire Data Domain or merely to force NetApp to spend more money.

EMC said it will move forward with its tender offer for Data Domain's stock. "EMC's all-cash tender offer remains superior to NetApp's proposed part-stock merger transaction. We are proceeding with our superior cash tender offer, which is not subject to any financing or due diligence contingency. We do not believe that the Data Domain stockholders will approve the merger transaction with NetApp," said Joe Tucci, EMC's chairman, president and CEO. "EMC urges the Board of Directors of Data Domain to not take any actions that would further impede a transaction that is a superior alternative for Data Domain's shareholders."

EMC said its tender offer will expire June 29, unless extended, and that it had filed a report on the offer with the Antitrust Division of the Department of Justice and the Federal Trade Commission.

Despite agreeing to the revised NetApp offer, Data Domain's board issued a statement on Thursday that said it is reviewing EMC's offer. "At this time, the board is not making a recommendation with respect to the EMC offer. Data Domain requests that its stockholders defer making a determination whether to accept or reject EMC's offer until Data Domain has communicated to stockholders its position regarding the tender offer from EMC."

The statement said the board will comment by June 16.