Data Domain to EMC: Nix, Null, Nein, Nyet, Non, Nuh-uh, Nope, Nay…
What part of “No” does EMC not understand?
On Monday the company once again said its bid for the data storage equipment maker Data Domain is “superior” to a competing offer from NetApp. This, despite the fact that Data Domain earlier in the day issued a statement recommending that shareholders reject EMC’s $30-a-share cash bid and instead accept a $30 cash-and-stock offer from NetApp.
“Our Board is committed to enhancing stockholder 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,” said Frank Slootman, president and CEO of Data Domain.
Why not? Well, among other things Data Domain hasn’t been able to discuss EMC’s offer because EMC hasn’t yet accepted the confidentiality and standstill agreement that would allow it to do so. For another, Data Domain must pay a $57 million termination fee if it should abandon its deal with NetApp–and that’s on top of a host of other considerable transaction expenses.
That’s understandable, I suppose. Still, it’s difficult to see why Data Domain insists that EMC’s all-cash offer is worth less than NetApp’s cash-and-paper bid. Unless it’s doing so to force EMC’s hand deeper into its wallet. And, indeed, that may be exactly what’s happening here. Sources say. EMC (EMC) could raise its offer to as much as $35 per share to win Data Domain (DDUP) or force NetApp (NTAP) to pay more than it can afford for it. “EMC is in the win-win box and NetApp is in the lose-lose box,” a source close to the company told Reuters. “EMC can pay more than NetApp can in a reasonable range. If NetApp wants to pay at an unreasonable range, that’s good for EMC.”