EMC wins bidding war in $2.1B deal for Data Domain

SAN JOSE, California (AP) -- For the last month and a half, a fierce bidding contest has lit up a staid but increasingly critical part of the computing world. On Wednesday, EMC Corp. walked away with the prize.

After muscling its way into talks it wasn't invited to, EMC outbid rival NetApp Inc. for a company called Data Domain Inc., whose technology helps companies cut the amount of data that gets stored multiple times. Data Domain had earlier agreed to get acquired by NetApp, but EMC swooped in with a higher price.

Data Domain said Wednesday that it has agreed to let EMC buy it for $33.50 per share, which is nearly double the price Data Domain's shares had when NetApp announced its intent to buy the company in May. EMC's offer amounts to $2.1 billion, when Data Domain's cash is subtracted from the price of the deal.

The offer was apparently too rich for NetApp, which had tried to buy Data Domain with a mixture of cash and stock. NetApp's last offer was $30 per share.

Analysts say NetApp couldn't match EMC's price and still make a compelling case to its shareholders for the deal, because it would have to issue too many new shares to raise the value of its offer. EMC offered all cash and a quicker closing for the deal.

EMC has $7.25 billion in cash and short-term investments -- nearly three times as much as NetApp.

Data Domain said Wednesday it terminated its previous merger agreement with NetApp, and will pay the company a $57 million penalty for pulling out.
For Hopkinton, Massachusetts-based EMC, "it was both a defensive and offensive move," said Ashok Kumar, an analyst with Collins Stewart. "If nothing else they wanted to keep Data Domain out of NetApp's hands."

Data Domain might seem a surprising company to inspire a heated takeover fight, especially in a recession that has companies watching their funds more closely. Also, by cutting out duplicative files, Data Domain's technology reduces the need for companies to buy more data-storage machines from EMC and NetApp.

Yet both companies wanted Data Domain simply because customers are asking for its technology. EMC and NetApp decided that any loss in sales from Data Domain's technology would be more than offset but the rising amount of data that companies are producing overall.

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