(WEB HOST INDUSTRY REVIEW) — The ongoing bidding war over Data Domain (www.datadomain.com) has taken a turn for the worst, with two law firms launching class action suits against the data storage solutions provider’s board, according to a report by CNET News.
NetApp (www.netapp.com) and EMC (www.emc.com) have been bidding for the sale of Data Domain since May 20, when NetApp offered $25 a share to buy Data Domain.
EMC soon jumped in on June 1, offering a $30-per-share bid, to which NetApp promptly countered with a similar offer.
A few weeks ago, Data Domain agreed to be acquired by NetApp for just short of $2 billion in cash and stock.
EMC later approached Data Domain’s shareholders with a comparable offer that would be paid entirely in cash, making it slightly more enticing than NetAff’s offer.
According to the report, the lawsuits allege that the method that Data Domain’s board took to accept NetApp’s offer may not have been a fair and open one.
On June 12, attorneys at Bernstein Litowitz Berger & Grossmann filed the suit in Delaware on behalf of the Police and Fire Retirement System of the city of Detroit and what the firm calls “similarly situated shareholders of Data Domain”.
In the lawsuit, the plantiff allege that Data Domain’s board did not adhere to its responsibility to shareholders by refusing to negotiate with EMC and for agreeing to sell Data Domain to NetApp without taking steps to maximize the price paid to Data Domain’s shareholders.
In a prepared statement, Bernstein Litowitz Berger & Grossmann law firm alleges that “Data Domain’s board of directors violated their fiduciary duties by approving the original and the restructured deals with NetApp,” and as a result, gave NetApp an “improper bidding advantage in the form of a termination fee, a no-shop/no-talk provision and matching rights.”
The firm continues by saying that 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.”
The lawsuit requests the court to issue an injunction that will stop Data Domain and NetApp from completing their merger.
Law firm Levi & Korsinskyn also filed similar, albeit separate, lawsuit in California last week against the company’s board.
The firm also released a statement: “Under the terms of the proposal, Data Domain’s shareholders would receive $30 to be paid in a combination of cash and NetApp stock. 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.”
