Storage giant EMC has won the battle for highly priced data deduplication vendor Data Domain, after its rival in the bidding stakes, NetApp, announced that it would not increase its bid.
The battle for Data Domain of Santa Clara, Calif., began in May when its Silicon Valley neighbor NetApp announced it had struck a friendly deal to acquire Data Domain in a cash and stock deal valued at $1.5 billion or $25 per share. East Coast rival EMC Corp. launched a rival bid for the company on June 1, raising the stakes to $30 per share in an all-cash bid.
NetApp matched EMC with another cash and stock bid, and on June 15 Data Domain's board recommended in favor of the NetApp merger, citing synergies between the two companies. But with a deeper war chest, EMC came back swinging this week, raising its offer to $2.1 billion, and sweetening the bid by removing any deal-protection provisions, including a termination fee.
The latest offer proved to be too much for NetApp. In a statement issued Wednesday, NetApp of Sunnyvale, Calif. said it would not submit a revised offer and that it has terminated the merger agreement with Data Domain. As a result, Data Domain will pay NetApp a $57 million break-up fee.
"While NetApp's acquisition of Data Domain would have produced benefits for customers and employees and complemented NetApp's existing growth trajectory, we remain highly confident in our already compelling strategic plan, market opportunities and competitive strengths," NetApp Chairman Dan Warmenhoven, said in a statement.
EMC had been considered somewhat of an outsider in the takeover war, primarily because its east coast culture was not seen as a good fit with the Silicon Valley culture at NetApp. In the end, however, it could afford to bring a better offer to the table. "This is a compelling acquisition both from a strategic and financial standpoint," EMC Chairman Joe Tucci said after NetApp conceded. "We look forward to bringing Data Domain together with EMC to form a powerful force in next-generation disk-based backup and archive."
The battle for Data Domain was primarily fought over the company's deduplication technology - a system for preventing data from being stored more than once in a storage network. It's a fairly common problem, eating up storage space. EMC offers its own deduplication product, but Data Domain is recognized as the market leader. Data Domain's revenues almost tripled between 2006 and 2007, from $46 million to $124 million, and more than doubled between 2007 and 2008, from $124 million to $274 million.
Data Domain estimates its revenues for 2009 will come in somewhere around $370 million, a strong growth story in a rough economy.