EMC, Iomega Begin Merger Talks
EMC has increased its offer for Iomega, and the offer appears to be good enough to open merger talks between the two (see EMC Makes a Play for Iomega).
EMC has offered $3.75 a share for Iomega for the company's 54.8 million outstanding shares, 50 cents a share higher than EMC's previous offer.
Iomega said its board of directors "has determined that the revised acquisition proposal from EMC would reasonably constitute a superior proposal" to Iomega's share purchase agreement to acquire ExcelStor Group. Under that deal, Iomega would issue 84 million additional shares to fund the merger, so the EMC offer doesn't include ExcelStor and would thus preempt that deal if EMC's bid for Iomega is successful.
Iomega said its board has authorized it to "furnish information to EMC and enter into discussions with it regarding its most recent proposal." Iomega said it provided notice of the talks to ExcelStor in accordance with the agreement between the two.
Iomega's statement noted that a merger with EMC is a long way from becoming a done deal.
"While Iomega's board of directors has determined that the EMC acquisition proposal would reasonably constitute a superior proposal, it has not determined that a transaction with EMC is superior to the business combination contemplated under the ExcelStor Purchase Agreement," Iomega said.
"There can be no assurance that EMC will ultimately make an offer that Iomega's board of directors will determine constitutes a superior proposal or that Iomega and EMC will reach an agreement," Iomega said.
Iomega also noted that the ExcelStor deal continues to move ahead. If the merger is terminated, Iomega would owe ExcelStor a roughly $7.5 million breakup fee.