Data Domain shareholders should reject EMC’s unsolicited takeover bid or risk being left without a suitor, Data Domain’s board of directors said Monday.
In a filing with the U.S. Securities and Exchange Commission, Data Domain’s board formally recommended its stockholders not tender their shares to EMC. It acted after accepting an amended offer from NetApp on June 4.
Data Domain agreed to be acquired by NetApp last month for about US$1.5 billion in cash and stock, but EMC stepped in on June 1 with an all-cash offer valued at $1.8 billion. NetApp then boosted its offer, and Data Domain says both bids are worth about $30 per share, based on NetApp’s share price on Friday. Data Domain makes enterprise backup products and has been a pioneer in data de-duplication, a technology for reducing capacity requirements that most storage companies are now using.
“Our board is committed to enhancing shareholder value and, after careful review with our outside advisors, determined that the $30 per share EMC offer is not in the best interests of our stockholders at this time,” Data Domain President and CEO Frank Slootman said in a press release on Monday.
The deal with NetApp is a negotiated agreement, while Data Domain has not been able to have any discussions with EMC, the board said. Not rejecting EMC’s bid would allow NetApp to terminate its own offer immediately, while Data Domain would still have no assurance that EMC would follow through on its offer.
In addition, EMC is not obligated to accept or pay for any shares of Data Domain common stock, and it could terminate or amend its offer at any time before its offer expires on June 29 if certain conditions haven’t been met, the board said. Among those conditions is EMC being satisfied that the deal with NetApp has been terminated.
If it turned down NetApp’s offer, Data Domain also would probably have to pay NetApp a $57 million termination fee, the board said.
In an open letter to Data Domain employees last week, EMC Chairman, President and CEO Joe Tucci said his company’s offer was superior because it was an all-cash bid. He also said EMC has learned how to preserve the cultures of acquired companies after buying 11 Silicon Valley vendors over the past six years. Data Domain becoming part of EMC, which is larger than NetApp, would be better for employees’ careers, he said.
If the NetApp acquisition goes through, it is expected to close within 60 to 110 days.