|
By Matthew Quinn
Data Domain today announced that its board of directors is advising stockholders to reject EMC's all-cash bid of $30 per share in favor of NetApp's $30 per share cash-and-stock offer. To fight off EMC's apparently unwelcome bid, Data Domain's board may have to claim that the government would likely challenge a merger of the two data storage and deduping companies.
EMC started a bidding war for Data Domain on June 1 when it trumped NetApp's original offer of $25 in cash and stock made on May 20. NetApp promptly upped its offer by $5 in cash, which Data Domain's board accepted on June 3.
Typically, an all cash deal is favored over a cash and stock offer. In attempting to make its case for the NetApp feal, Data Domain's board laid out some of the factors it considered in weighing the offers.
It would be difficult, however, to imagine any of these reasons being good enough if EMC were to simply up the ante once again. Shareholders, it appears, are expecting just that with Data Domain's share price now around $33.
EMC is in a far better position to go higher, with $6.3 billion in cash and cash equivalents as of March 31 compared to $1.7 billion for NetApp. EMC said it will use existing cash balances to finance the transaction.
So where is EMC's sweetened bid? So far, it hasn't materialized.
One issue that might be holding up an improved offer from EMC is an antitrust review of both bids.
Indeed, NetApp is already playing the anti-trust card. The company's chief marketing officer, Jay Kidd, told Reuters EMC dominates the market for emerging storage technologies, such as virtual tape libraries, which come equipped with deduplication software. He said EMC owns more than 50% of the market for this technology, including a partnership with deduplication software maker Quantum.
NetApp controls only 7% of the market, Kidd said.
Beyond boosting its $30 per share bid, EMC might have to offer some sort of legal assurances that it won't walk away from a Data Domain deal if antitrust regulators get into the act. Given the current regulatory climate in Washington, it's conceivable that the FTC might challenge such a merger.
Data Domain's board would no doubt want guarantees from EMC that it won't use potential regulatory opposition as an excuse to back out of a deal.
Only registered users can write comments.
Please login or register. |
