NetApp has terminated its merger agreement with data deduplication appliance vendor Data Domain after declining to raise its offer in the wake of a blockbuster $2.1 billion bid by EMC.
NetApp announced today that it will not revise its proposal to acquire Data Domain and that the two companies have terminated their merger agreement, clearing the way for EMC to acquire Data Domain.
The announcement comes on the heels of a revised acquisition proposal from EMC. Earlier this week, EMC upped the ante with an offer to acquire all the outstanding common stock of Data Domain to $33.50 per share in cash, for a total value of approximately $2.1 billion, net of Data Domain’s cash. The new proposal eclipsed NetApp’s $1.9 billion offer.
EMC solidified its pending deal with Data Domain late today when it announced it has entered into a definitive agreement to acquire the company.
EMC expects to complete its acquisition of Data Domain before the end of July.
In a statement issued this afternoon, NetApp’s chairman and CEO Dan Warmenhoven says “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.”
He continues, “NetApp applies a disciplined approach to acquisitions, one focused intently on creating long-term value for our stockholders. We therefore cannot justify engaging in an increasingly expensive and dilutive bidding war that would diminish the deal’s strategic and financial benefits.”
Warmenhoven says NetApp will continue to focus on its strengths in virtualization, storage efficiency and unified storage technologies.
NetApp has received a $57 million break-up fee from Data Domain as a result of the termination of the deal.
Enterprise Strategy Group (ESG) founder and senior analyst, Steve Duplessie, the price tag for Data Domain was too high from the start of the EMC-NetApp bidding war.
“I think NetApp would have enjoyed a lot of synergies and opportunity with Data Domain, but at that price, there was simply no margin for error. I think it would have strapped them and put an unnecessary microscope on their every move that would deflect from the fact that they are a great company,” he says.
NetApp, he says, will eventually be happy with its decision, while EMC has a lot of work to do to bring Data Domain into the fold.
“[EMC] needs to do a ton of work to rationalize their whole product set, kill a lot of other dedupe offerings one way or another, get the sales team on the same page with a believable story and try to keep the Data Domain channel and sales force together for a while and do it all while growing the business rapidly,” he says. “They certainly have the muscle and brains to make it work, but it won’t be easy”
Data Domain could not be reached for comment at press time.