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EMC raises stakes in bidding war

EMC Corp., which has its headquarters in Hopkinton, is the largest data storage firm in the world. EMC Corp., which has its headquarters in Hopkinton, is the largest data storage firm in the world. (Bill Polo/ Globe Staff/ File 2007)
By Hiawatha Bray
Globe Staff / July 7, 2009
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EMC Corp. has jacked up its offer for Data Domain Inc. to more than $2.1 billion in its latest effort to win a bidding war against rival NetApp Inc.

EMC yesterday increased its all-cash offer for Data Domain’s 62.9 million outstanding shares by more than 10 percent, from $30 to $33.50 per share.

“Our calculus was that this was the price that would be compelling enough to convince the Data Domain board to agree to our transaction,’’ said Matthew Olton, EMC’s vice president of corporate development.

EMC, the world’s largest data storage firm, also said the Federal Trade Commission has granted regulatory approval of the deal. The commission also approved a possible Data Domain merger with NetApp, but its ruling was especially good news for EMC. NetApp executives had tried to discourage Data Domain shareholders from accepting EMC’s offer by warning of possible antitrust action against EMC, which is headquartered in Hopkinton.

With all regulatory roadblocks cleared, Olton said yesterday that EMC can close the deal in two weeks by simply purchasing Data Domain shares with cash. NetApp’s offer, a $1.9 billion combination of cash and NetApp stock, must be approved by Data Domain shareholders, and they won’t meet until Aug. 14. Olton also said the EMC offer does not forbid Data Domain from entertaining bids from other buyers. Neither does it include a breakup fee if the Data Domain board agrees to the deal, but later changes its mind.

“The NetApp board of directors will carefully weigh its options, keeping in mind both its fiduciary duty to its stockholders and its disciplined acquisition strategy,’’ said NetApp chief executive Dan Warmenhoven. “We will provide an update shortly.’’

Data Domain declined to comment.

Aaron Rakers, a financial analyst at Stifel Nicolaus & Co. in St. Louis, said the new EMC bid puts NetApp at a serious disadvantage in the bidding war for Data Domain. “It forces NetApp to chase an acquisition that looks increasingly expensive,’’ said Rakers, “especially when considering the company’s net cash position of $1.2 billion and 52 percent of its cash tied up internationally.’’

Data Domain of Santa Clara, Calif., is a major producer of “de-duplication’’ products, which are used by businesses to eliminate unnecessary copies of data files. Companies that regularly back up important files often needlessly copy the same files dozens of times, wasting expensive data storage capacity. De-duplication systems prevent additional copying of files that are already backed up.

On May 20, NetApp of Sunnyvale, Calif., agreed to buy Data Domain for $1.5 billion in cash and stock.

On June 1, EMC made an all-cash offer of $30 a share, or $1.8 billion, for the de-duplication company. Two days later, NetApp increased its offer to $1.9 billion. The Data Domain board voted to accept. The company later agreed to review EMC’s offer, but rejected it.

EMC had also sought control of Data Domain through a tender offer, allowing Data Domain shareholders to sell their stock directly to EMC. But the $30 price brought few takers. As of last week, EMC had secured less than one-third of 1 percent of Data Domain stock.

Hiawatha Bray can be reached at bray@globe.com.