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July 24, 2009 (12:25p) - Transaction
Completed
EMC successfully completed its tender offer for
DDUP yesterday, July 23, 2009.
Transaction length: 58
days (from initial EMC offer)
July 9, 2009 (8:25a) - Definitive Agreement
Announced (EMC)
EMC yesterday announced that it has entered a
definitive merger agreement with DDUP for $33.50 per share.
NTAP has formally terminated its previous merger agreement
with DDUP.
EMC's tender offer is expected to be successfully completed
on Friday, July 17, 2009.
July 7, 2009 (11:15a) - NTAP Status
NTAP yesterday issued very passive and brief
statements indicating it will evaluate its options in light of EMC's increased
offer and HSR clearance for the proposed EMC-DDUP combination. Since those
statements, NTAP has remained silent regarding its deal with DDUP.
Obviously, NTAP does not want to enter a bidding war with
EMC that it cannot win. On the other hand, by matching EMC's offer, NTAP could
at least force EMC to pay beyond what it would like to pay to acquire DDUP.
This appears to be about the only victory NTAP can hope to obtain in this
situation now that EMC has firmly established its position.
While it is believed to be more likely that NTAP will
concede to the current EMC offer, it is also believed to be within the realm of
possibility that NTAP will equal the current offer in order to make EMC again
increase its offer for DDUP.
July 6, 2009 (9:15a) - EMC Offer Increased /
HSR Early Termination
Moments after the previous update, EMC announced
an increase in its offer for DDUP to $33.50 per share, along with a
tender offer extension to July 17, 2009
Additionally, EMC has announced HSR clearance via early
termination from the FTC.
These two events clearly provide DDUP with the anticipated
superior proposal from EMC, effectively rendering the NTAP transaction
inferior. Since NTAP lacks the ability to enter a protracted bidding war with
EMC, it is highly unlikely that the company will attempt to maintain its merger
agreement with DDUP.
July 6, 2009 (8:05a) - Preliminary Proxy
Statement Filed (NTAP)
NTAP filed the
third amended
proxy statement for its merger agreement with DDUP with the SEC on July 2,
2009.
The DDUP shareholder meeting has been scheduled on August
14, 2009. The record date is June 17, 2009.
There is currently little expectation that the DDUP
shareholder meeting will proceed on August 14, as EMC is fully expected to
submit a superior offer prior to that date. EMC's next offer will likely be in
the range of $33-34 and is anticipated at the end of this month or during the
first week of next month.
June 29, 2009 (8:00a) - EMC Tender Offer
Extended
EMC has extended its tender offer for DDUP until
Friday, July 10, 2009.
EMC has not increased its offer above the current $30
per DDUP share as part of the tender offer expiration.
Nevertheless, EMC is fully expected to increase its offer to
at least $33 prior to the DDUP special shareholder meeting associated with the
NTAP merger transaction.
June 24, 2009 (8:45a) - Preliminary Proxy
Statement Filed (NTAP)
NTAP filed the
second amended
proxy statement for its merger agreement with DDUP with the SEC yesterday
(6/23).
The DDUP shareholder meeting date has not been
scheduled as of this latest proxy revision.
The current proxy delay will now allow EMC until at
least the third week in July to increase its current $30 per DDUP share
offer. It is anticipated by this publication that an EMC offer in the area of
$33/34 will be made no later than the second week of July.
June 18, 2009 (12:45p) - Preliminary Proxy
Statement Filed (NTAP)
NTAP filed the
first amended
proxy statement for its merger agreement with DDUP with the SEC yesterday.
The key aspect to note with the SEC where NTAP is concerned
is the rate at which the company is turning around comments from the
regulatory. This clearly an effort to obtain SEC consent rapidly with the
intent of scheduling the DDUP shareholder meeting as quickly as possible. Based
on the initial two-week turn-around, it looks like NTAP hopes to get SEC
consent by early-July, at the latest, which would facilitate and early-August
DDUP shareholder meeting.
Nevertheless, the time required for the SEC process will
provide EMC with ample time to assess DDUP shareholder sentiment and adjust its
offer accordingly. Assuming the DDUP shareholder is set for the first week or
two of August, EMC will very likely increase its current offer by the second or
third week of July.
June 18, 2009 (11:40a) - HSR Status
(EMC)
EMC has announced the withdrawal and refiling of
the required HSR notification associated with its offer for DDUP. This is a
somewhat unusual step as the initial notification was submitted just four days
ago (6/15).
Presumably, EMC was notified in advance, or discovered on
its own, that additional details and/or time would be required by the FTC in
assessing the implications of a DDUP-EMC combination, as opposed to the
proposed DDUP-NTAP combination. As the current FTC/DOJ has clearly shown a
greater propensity for interest in merger transactions so far, this development
should not come as a major surprise.
With respect to the HSR review involving EMC, we have yet to
locate any relevant information to suggest that a DDUP-EMC combination actually
presents substantial competition issues. Granted, EMC is the established leader
in the overall data storage industry, but its command of the market has been
seriously compromised by major players such as IBM and Hewlett Packard, among
others, in the last few years. With DDUP being essentially a second-tier,
albeit a critical second tier, player, any scenario involving DDUP being
acquired simply will not adversely affect the overall data storage
market.
For the record, DDUP cites the following as its competitors
in the relevant markets:
In addition to competing with traditional
providers of tape-based storage systems, such as Sun Microsystems, Inc., or Sun
Microsystems, and Quantum Corporation, we compete with other established
storage companies such as EMC Corporation, or EMC, and NetApp, Inc., or NetApp,
and to a lesser extent Hitachi Data Systems Corporation, or HDS,
Hewlett-Packard Company, or HP, and International Business Machines
Corporation.
Whether or not EMC is essentially attempting to prevent NTAP
from approaching the top-tier among storage providers is irrelevant from an
antitrust standpoint. That must be viewed as a sound and inevitable business
strategy, regardless of NTAP's public claims of competition issues. The bottom
line where the FTC review is concerned is that DDUP's change of control will
not create a major competition issue in data storage as long as IBM, HP, Sun,
and others remain viable options.
The following chart tends to support the above conclusions.
Note that DDUP does not appear among the recognized top players in the
key "External Controller-Based Disk Storage" market:
|
Company
|
1Q09 Market Share (%)
|
1Q08 Market Share (%)
|
| EMC
|
23.2
|
24.6
|
| IBM
|
11.1
|
11.5
|
| Hitachi/HDS
|
10.6
|
10.2
|
| HP
|
9.8
|
11.4
|
| Dell
|
9.2
|
9.0
|
| Network Appliance
|
8.5
|
8.4
|
| Sun Microsystems
|
4.0
|
5.1
|
| Others
|
23.7
|
19.8
|
| Total
|
100.0
|
100.0
|
In short, if and when EMC increases its offer for DDUP, it
is extremely unlikely that the HSR review will present major timing
issues. Even with the concept of intensified antitrust scrutiny, a DDUP-EMC
combination literally does not meet the criteria for an HSR second request.
June 16, 2009 (8:20a) - Status Report
As widely reported, EMC has not increased its
offer as of this entry and has instead maintained its current $30 per share
offer for DDUP, claiming the offer is adequate and in the best interests of
DDUP shareholders.
In response, DDUP has formally re-rejected the EMC offer and
re-iterated its support for the NTAP merger agreement. Of note, NTAP has issued
separate comments suggesting that a DDUP-EMC transaction may encounter
antitrust issues if a formal agreement emerges between the two
companies.
First, it will be stated again, emphatically, that EMC will
not maintain the current offer level if it truly intends to acquire DDUP.
Despite its current posture, EMC will need to increase its offer and is fully
expected to do so in the very near future. Again, an offer in the range of
$33-35 is expected.
Second, despite NTAP's implications, there is very little
chance that antitrust reviews will impede EMC's ability to quickly consummate a
transaction with DDUP. This appears to be a standard scare tactic by NTAP aimed
at persuading DDUP shareholder to remain committed to the current merger
transaction. Naturally, this commitment will quickly erode if and when EMC
raises its offer.
The FTC has begun its review of both transactions. As EMC's
offer will be reviewed under tender offer guidelines, an FTC ruling is expected
on or about June 30, 2009. The current expectation is that FTC clearance will
be granted in the standard review period, although additional research will be
conducted to confirm this.
June 15, 2009 (8:30a) - EMC Offer Status
According to multiple reports published over the
last several days, EMC is preparing to increase its all-cash offer for DDUP
within the next several days. Various reports indicate the next offer from EMC
will be in the range of $34-$35.
As of this entry, EMC has issued no formal second offer or
comments related to an improved offer.
It will simply be noted again that this publication
continues to view EMC as the probable winner in any bidding war for DDUP. As a
final offer price in the $35 range has been anticipated from the outset, it
will not be surprising if EMC's next offer is below that level if only to test
NTAP's resolve to maintain its agreement with DDUP.
Regardless, EMC can clearly outlast and outbid NTAP if it
decides to do so in this situation. Thus, DDUP's final buyout price remains
expected in the $35 range, at minimum.
June 10, 2009 (9:10a) - Status Report
EMC has taken the somewhat perplexing step of
appealing directly to DDUP employees with what is essentially a
sentimental approach of persuasion. In essence, EMC has attempted to sway
employees, rather than DDUP shareholders, by comparing the corporate
environments of the two companies as an argument for a merger. Although this is
an interesting effort by EMC, it is hardly the necessary step in convincing
DDUP shareholders or its leadership into abandoning the NTAP deal.
EMC's latest action must be viewed as a preliminary step in
maintaining an amicable relationship with DDUP before it takes the more
critical steps required to draw DDUP into negotiations. Naturally, an improved
offer above the $30 level will be necessary to accomplish this regardless of
EMC's friendly advances at this point.
Given that EMC is certainly able to improve its offer via
all cash and that it can outbid NTAP if it chooses, there is absolutely no
reason to expect anything but a second offer from EMC in the immediate
future.
Furthermore, with DDUP clearly coveted by both companies, a
final buyout price in the range of $33-35 is certainly not out of the question.
June 5, 2009 (10:30a) - Status Report
This entry will not that EMC has still not
issued a formal response to the NTAP offer increase announced on June 3.
Instead, EMC has chosen to move forward with its original tender offer without
referring to the DDUP-NTAP agreement for the time being.
It is fully anticipated that EMC will announce its own
increased offer in the very near future. This should be in the area of $32 cash
in order to obtain DDUP consideration.
Also, DDUP has announced that it will formally respond to
the EMC offer by June 16. Barring an increase by that date, DDUP will almost
certainly cordially reject EMC in favor on NTAP with the expectation of a
second EMC offer.
June 3, 2009 (8:10a) - NTAP Offer
Increased
NTAP has announced an increase in its offer for
DDUP valuing the company at $30 per share. The revised offer consists of
$16.45 per share in cash and the following stock conversion:
(i) 0.7783 shares of NetApp common stock if the
"Closing Average" (as defined in the Merger Agreement) is less than
$17.41, (ii) 0.6370 shares of NetApp common stock if the "Closing
Average" is greater than $21.27, and (iii) that fraction of a share of
NetApp common stock equal to the quotient obtained by dividing $13.55 by the
"Closing Average", if the "Closing Average" is (A) less
than or equal to $21.27 and (B) greater than or equal to $17.41.
Naturally, this response by NTAP will force EMC to increase
its offer above the all-cash $30 offer in order to convince DDUP to consider
terminating the current merger agreement. Since NTAP has chosen to enter a
bidding war with EMC, it will not be surprising to see DDUP's offer price
exceed $33 per share in the coming weeks.
Additionally, EMC filed its
initial tender
offer statement and offer to purchase for its offer for DDUP with the SEC
yesterday (6/2).
The current tender offer expiration date is June 29,
2009. This expiration date contemplates a termination of DDUP's merger
agreement with NTAP.
June 2, 2009 (9:45a) - Initial Analysis /
Timelines
Coverage of this transaction will be initiation
from the perspective that EMC is far more likely to prevail in acquiring DDUP
than NTAP. At the time of this entry, NTAP has not issued a response to
EMC's $30 per share offer for EMC. Given that NTAP will have little chance in
succeeding in a bidding war with EMC, it is extremely likely that NTAP will
concede fairly quickly in this situation.
With this in mind, the timeline chart below illustrates
EMC's recent history of major acquisitions. Suffice it to say that the company
is one of the most efficient deal closers in the hardware/storage industry and
this will almost certainly be repeated with DDUP. This of course assumes that
NTAP will step aside in the coming days or weeks.
Assuming a DDUP-EMC deal moves forward without major
interference, EMC should have little difficulty completing the transaction by
the third or fourth week of July.
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