EMC (NYSE: EMC) this morning raised its takeover bid for Data Domain (NASDAQ: DDUP) after the FTC cleared the way for the merger, leaving the next move up to rival NetApp (NASDAQ: NTAP).
EMC's $2.1 billion all-cash bid for the data deduplication specialist is about seven times Data Domain's sales in the last four reported quarters, and about 10 percent greater than NetApp's cash-and-stock offer.
It is the second time the price for Data Domain has gone up since NetApp first announced plans to acquire the company on May 20. The acquisition price is now 20 percent more than NetApp's initial offer.
EMC also said it has removed all deal protection provisions from its offer, and urged Data Domain's board to do the same. EMC said it can close the deal within two weeks, "almost a month faster than the NetApp proposal."
The data storage giant added that the Federal Trade Commission has granted the company early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, concluding the regulatory review process "and removing all regulatory conditions required to proceed with its purchase of Data Domain."
"Data Domain does not have any justification for continuing deal protection provisions for NetApp or any other party given our willingness to proceed without them," EMC CEO Joe Tucci wrote in a letter to Data Domain. "It was questionable agreeing to deal protections in your initial agreement with NetApp, when you knew of our interest in acquiring the company. There is no basis for continuing with them now."
Data Domain's apparent preference for NetApp in the merger negotiations has created legal issues for the company, including a court date next month on a lawsuit challenging Data Domain-NetApp deal protection provisions.
EMC said it is extending its offer to acquire Data Domain until July 17.
NetApp, meanwhile, said it too has received antitrust clearance for the merger, and added that Data Domain's board has set a special meeting of Data Domain stockholders for August 14 to vote on the merger. But barring a higher offer from NetApp, the prize may go to EMC.
Stifel Nicolaus analyst Aaron Rakers wrote in a research note this morning that EMC's higher offer "forces NetApp to chase an acquisition that looks increasingly expensive, especially when considering the company's net cash position of $1.2 billion and ~52% of its cash tied up internationally."
The alternative, said Rakers, is that "NetApp loses an acquisition to EMC that appears to favorably fit strategically within its overall business model and investors begin to question the company's organic growth rate going forward."
In a statement released this afternoon, NetApp CEO Dan Warmenhoven said, "In response to EMC's revised, unsolicited offer, the NetApp Board of Directors will carefully weigh its options, keeping in mind both its fiduciary duty to its stockholders and its disciplined acquisition strategy. We will provide an update shortly."
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