Storage Soup

Jun 4 2009   8:43PM GMT

Scenes from a bidding war for Data Domain

Dave Raffo Dave Raffo Profile: Dave Raffo

NetApp and EMC have filed forms with the SEC detailing the timelines of their negotiations with Data Domain, which has accepted NetApp’s $1.9 billion offer while EMC’s $1.8 billion offer remains on the table.

Some highlights of the negotiations:

• Data Domain CEO Frank Slootman and NetApp CEO Dan Warmenhoven talked informally “from time to time” about their companies and the storage industry since 2006. Last November, a representative of Goldman Sachs arranged for a meeting between the two CEOs to discuss a possible “business combination” between the two. Slootman and Warmenhoven agreed the time was not right for any type of deal between the companies.

• Goldman Sachs arranged another meeting last March 17 between Slootman and NetApp president Tom Georgens to discuss “strategic opportunities” between Data Domain and NetApp. At that meeting, Slootman agreed to discuss a potential deal with the Data Domain directors. He briefed chairman Aneel Bhursi and the other directors that day, and the Data Domain board agreed to open negotiations with NetApp.

• Data Domain met with another company, referred to as “Company A,” on April 6 to discuss what the NetApp filing called “terms of a commercial relationship.” The unidentified the company is believed to be either Hitachi Data Systems or Symantec, but there were no further discussions after April 6.

• On April 27, NetApp made its first offer of cash and stock worth $22 to $23 per Data Domain share. The offer included a potential position on the NetApp board for Bhursi and a potential NetApp management role for Slootman. Data Domain’s board wanted a better financial deal.

• On May 6, after two more NetApp offers and a Data Domain counter of $26 per share in cash and stock, the companies tentatively agreed to a price of $25 per share in cash and stock – worth around $1.5 billion. The next day, an EMC board member contacted Slootman to arrange a meeting with EMC CEO Joe Tucci.

• Warmenhoven said “NetApp would not engage in a bidding contest if additional parties emerged seeking to acquire Data Domain,” according to NetApp’s filing.

• On May 7, Slootman agreed to meet Tucci May 27 in the San Francisco area, but cancelled the meeting on May 20 after the sides reached a final agreement and NetApp announced that Data Domain accepted its $1.5 billion offer. Tucci was likely referencing the cancelled meeting in his public letter to Slootman Monday, which read “We are disappointed that we were not given an opportunity to explore a business combination prior to the announcement of your proposed transaction with NetApp, particularly since I believe you should have been aware of our interest.”

• EMC representatives continued to contact Data Domain representatives after they accepted $1.5 billion offer. Data Domain reps told EMC reps they could not talk to them because of a non-solicitation clause in the merger agreement with NetApp.

• Tucci called Slootman Monday to notify him of EMC’s cash offer to Data Domain shareholders worth $30 per share or $1.8 billion. The Data Domain board met that day to review EMC’s offer, then notified NetApp they would contact EMC about its offer.

• NetApp said it would increase its offer to $30 in cash and stock – worth $1.9 billion – Tuesday, and made the offer public Wednesday morning. Data Domain’s board accepted later in the day, and EMC publicly stated its offer is still superior to NetApp’s revised offer.

Today, Data Domain’s board said it is reviewing EMC’s offer and will make a recommendation to shareholders by June 16.

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