By Anupreeta Das
NEW YORK, June 10 (Reuters) - The bidding war over storage company Data Domain Inc could drag on for weeks until antitrust regulators review competing offers from EMC Corp and NetApp Inc for red flags.
Although No. 1 corporate data storage equipment maker EMC says it is confident it will get the regulatory green light, people familiar with the matter said the company may raise its offer if antitrust concerns appear to make a tie-up with NetApp more preferable to Data Domain shareholders.
Data Domain, whose technology helps companies reduce the amount of storage space they need to back up data, has agreed to be acquired by EMC's smaller rival, NetApp, for $1.9 billion, or $30 a share.
NetApp initially agreed last month to pay $1.5 billion, or $25 a share, for Data Domain, before EMC stepped in with a $30-a-share offer that compelled NetApp to raise its bid.
Data Domain shareholders are yet to vote on NetApp's offer, and EMC's tender offer expires June 29.
But if Data Domain's stock price is any indication, investors expect a higher bid. Shares of Data Domain have hovered above $32 since EMC made its unsolicited offer.
Whether that higher bid comes could depend on the outcome of the regulatory review, which is currently under way.
'My initial reaction was that, certainly, EMC is going to get a second request' for information, said John Briggs, who co-heads the antitrust practice at Axinn Veltrop & Harkrider LLP and is not involved in the deal.
'Although it's not completely clear that NetApp isn't going to get a second request also,' Briggs said, adding it was less likely than EMC.
Regulatory requests for more information are often considered setbacks for mergers -- especially when there are two potential buyers -- because they can delay deals for months.
'It's possible that one of these companies gets a second request and the other one doesn't, in which case it's game over,' Briggs said.
THE BATTLE FOR STORAGE CONTROL
If regulators raise concerns about a combination of EMC and Data Domain, EMC might raise its offer and include assurances that the deal will get done, two sources told Reuters on condition of anonymity because the talks are confidential.
EMC, which has more than $7 billion in cash, has the financial heft to raise its offer by one or two dollars per share.
If regulators raise concern, EMC will need to increase their bid 'appreciably' to offset regulatory risk, one source said.
EMC spokesman Michael Gallant said the company is confident that the deal will win regulatory approval following a normal review.
That has not stopped NetApp from waving the antitrust red flag. The Sunnyvale, California-based company has said its cash-and-stock proposal is superior, partly because a deal between EMC and Data Domain would not clear antitrust review.
EMC and NetApp both make hardware and software that let companies store, manage and back up their data.
Data Domain specializes in a technology that eliminates duplicate pieces of information in the process of backing it up, thereby saving companies costly storage space.
NetApp's chief marketing officer, Jay Kidd, said EMC already dominates the market for emerging storage technologies, such as virtual tape libraries, which come equipped with deduplication software.
Kidd said EMC owns more than 50 percent of the market for this technology, including a partnership with deduplication software maker Quantum Corp. NetApp controls only 7 percent of the market, he said.
EMC and Data Domain have complementary storage technologies, EMC spokesman Gallant said. 'We reject NetApp's efforts to publicly suggest otherwise,' he said.
Bill Andrews, chief executive of privately owned data deduplication company ExaGrid, echoed NetApp's antitrust concerns.
He also questioned EMC's intent: 'Are they a spoiler or are they an acquirer? EMC may have entered the game to drive the price up for Data Domain, thereby making it more expensive for its rival NetApp to acquire the company, Andrews said.
In that case, 'EMC could be counting on regulatory roadblocks' to walk away from the deal, having accomplished its mission, he said.
(Reporting by Anupreeta Das; editing by Matthew Lewis)
((anupreeta.das@thomsonreuters.com; + 1 646-223-6224)) Keywords: DEALTALK/DATADOMAIN (Click on http://blogs.reuters.com/category/themes/mediafile/ to see Reuters MediaFile blog) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, June 10 (Reuters) - The bidding war over storage company Data Domain Inc could drag on for weeks until antitrust regulators review competing offers from EMC Corp and NetApp Inc for red flags.
Although No. 1 corporate data storage equipment maker EMC says it is confident it will get the regulatory green light, people familiar with the matter said the company may raise its offer if antitrust concerns appear to make a tie-up with NetApp more preferable to Data Domain shareholders.
Data Domain, whose technology helps companies reduce the amount of storage space they need to back up data, has agreed to be acquired by EMC's smaller rival, NetApp, for $1.9 billion, or $30 a share.
NetApp initially agreed last month to pay $1.5 billion, or $25 a share, for Data Domain, before EMC stepped in with a $30-a-share offer that compelled NetApp to raise its bid.
Data Domain shareholders are yet to vote on NetApp's offer, and EMC's tender offer expires June 29.
But if Data Domain's stock price is any indication, investors expect a higher bid. Shares of Data Domain have hovered above $32 since EMC made its unsolicited offer.
Whether that higher bid comes could depend on the outcome of the regulatory review, which is currently under way.
'My initial reaction was that, certainly, EMC is going to get a second request' for information, said John Briggs, who co-heads the antitrust practice at Axinn Veltrop & Harkrider LLP and is not involved in the deal.
'Although it's not completely clear that NetApp isn't going to get a second request also,' Briggs said, adding it was less likely than EMC.
Regulatory requests for more information are often considered setbacks for mergers -- especially when there are two potential buyers -- because they can delay deals for months.
'It's possible that one of these companies gets a second request and the other one doesn't, in which case it's game over,' Briggs said.
THE BATTLE FOR STORAGE CONTROL
If regulators raise concerns about a combination of EMC and Data Domain, EMC might raise its offer and include assurances that the deal will get done, two sources told Reuters on condition of anonymity because the talks are confidential.
EMC, which has more than $7 billion in cash, has the financial heft to raise its offer by one or two dollars per share.
If regulators raise concern, EMC will need to increase their bid 'appreciably' to offset regulatory risk, one source said.
EMC spokesman Michael Gallant said the company is confident that the deal will win regulatory approval following a normal review.
That has not stopped NetApp from waving the antitrust red flag. The Sunnyvale, California-based company has said its cash-and-stock proposal is superior, partly because a deal between EMC and Data Domain would not clear antitrust review.
EMC and NetApp both make hardware and software that let companies store, manage and back up their data.
Data Domain specializes in a technology that eliminates duplicate pieces of information in the process of backing it up, thereby saving companies costly storage space.
NetApp's chief marketing officer, Jay Kidd, said EMC already dominates the market for emerging storage technologies, such as virtual tape libraries, which come equipped with deduplication software.
Kidd said EMC owns more than 50 percent of the market for this technology, including a partnership with deduplication software maker Quantum Corp. NetApp controls only 7 percent of the market, he said.
EMC and Data Domain have complementary storage technologies, EMC spokesman Gallant said. 'We reject NetApp's efforts to publicly suggest otherwise,' he said.
Bill Andrews, chief executive of privately owned data deduplication company ExaGrid, echoed NetApp's antitrust concerns.
He also questioned EMC's intent: 'Are they a spoiler or are they an acquirer? EMC may have entered the game to drive the price up for Data Domain, thereby making it more expensive for its rival NetApp to acquire the company, Andrews said.
In that case, 'EMC could be counting on regulatory roadblocks' to walk away from the deal, having accomplished its mission, he said.
(Reporting by Anupreeta Das; editing by Matthew Lewis)
((anupreeta.das@thomsonreuters.com; + 1 646-223-6224)) Keywords: DEALTALK/DATADOMAIN (Click on http://blogs.reuters.com/category/themes/mediafile/ to see Reuters MediaFile blog) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.