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NetApp (NASDAQ: NTAP) has raised its offer for Data Domain (NASDAQ: DDUP) three times since merger talks began in earnest in March, a revelation that one analyst says suggests that the company might not be willing to go much higher in its bidding war with EMC (NYSE: EMC) for the data deduplication specialist.
In an SEC filing today, NetApp revealed that it held initial discussions with Data Domain last November, but they went nowhere.
Talks restarted in March, and NetApp made its first offer in late April for around $22 to $23 a share. The company raised its offer to $24 a week later, and then offered $25 after Data Domain requested $26, an offer accepted by Data Domain on May 20.
On May 11, Data Domain scheduled a meeting with EMC CEO Joe Tucci for May 27, which was canceled after the company agreed on a deal with NetApp. EMC bid $30 for Data Domain earlier this week, an offer matched by NetApp.
Data Domain has since accepted the revised NetApp offer, but the issue appears far from settled.
Stifel Nicolaus analyst Aaron Rakers wondered in a research note today if NetApp's four offers for Data Domain means the company has "no intent to engage in a bidding war." He noted that when NetApp CEO Dan Warmenhoven was informed about the meeting with EMC, Warmenhoven "reiterated his company's position to not engage in a bidding contest if additional parties emerged seeking to acquire Data Domain."
Rakers noted that Data Domain "insisted on a process that would permit a superior proposal from a third-party to surface after signing of the merger agreement with NetApp that allowed for the company's board to consider and accept superior proposals." He said Data Domain's board "consider[ed] it reasonably likely that EMC would provide a higher offer," a prediction EMC proved correct.
The NetApp filing also revealed that a third company had expressed interest in Data Domain in early April, but talks went nowhere. Rakers speculated that the company might have been Fujitsu or Hitachi.
Here Come the Lawyers
Not surprisingly, where there's big money at stake and an acquisition target that clearly favors one suitor over another, securities lawyers can't be far behind.
One law firm Levi & Korsinksy has taken out Google text ads looking for Data Domain investors to join a class action lawsuit against the company for failing "to fully shop the company to entities that it knew would be interested in acquiring the company."
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