EMC and NetApp fight to buy Data Domain

New legal challenges muddle corporate fight.

The ongoing battle to take over Data Domain between EMC and NetApp has taken a new turn with tow legal challenges that could muddy the waters still further.

EMC NetApp's of US$1.5 billion to buy the data deduplication vendor with a US$1.8 billion bid, but was trumped by NetApp who counter-offered US$1.9 billion.

On June 15 the Data Domain board recommended its shareholders stick to the NetApp bid.

However, EMC insists its offer is superior based on stock valuations and has asked the Federal Trade Commission to examine the bid.

Now two new lawsuits threaten to complicate the process further.

Legal firm Levi & Korsinsky has filed a class action suit against the directors of Data Domain, suggesting that the NetApp bid it accepted was not in the best interests of shareholders.

“Data Domain's shareholders would receive US$30.00 to be paid in a combination of cash and NetApp stock,” the legal firm said.

“In addition, NetApp offered positions on its board to certain Data Domain officers and there are rumors that the Data Domain CEO Slootman could be the next CEO of NetApp. This raises questions as to whether the sales process conducted by the Board was fair and open.”

In addition the Detroit Police & Fire Retirement System has filed a separate lawsuit over the takeover.

"Data Domain's board of directors violated their fiduciary duties by approving the original and the restructured deals with NetApp, both of which give NetApp an improper bidding advantage in the form of a termination fee, a no-shop/no-talk provision and matching rights," said the Bernstein Litowitz Berger & Grossmann law firm in a statement.

"The board granted each of these deal protections before any value-maximizing process took place, in a blatant effort to ensure that their favored merger partner is Data Domain's ultimate acquirer."

Data Domain is such a prize because of its success in the field of eliminating data duplication, which is becoming a massive storage problem. As backups are made more frequently the amount of duplicated data grows and is largely useless.

For example, if a manager sends a PowerPoint presentation to twenty colleagues via email then all of them are backed up. Being able to eliminate all but one frees up 95 per cent of the space the files would otherwise have occupied, necessitating less investment in storage.