NetApp Letter to Data Domain Chairman of Board of Directors
June 2, 2009
Aneel Bhusri
Chairman of the Board of Directors
Data Domain, Inc.
2421 Mission College Boulevard
Santa Clara, CA 95054
Dear Aneel:
On behalf of NetApp, I am pleased to
reiterate our continued interest and enthusiasm for a potential
combination of Data Domain and NetApp. As you know, we believe
that a combination has the potential to create a combined company
that is unparalleled in its position to add real value for our
customers by solving their storage efficiency needs.
In light of EMC's recently announced
unsolicited proposal to acquire Data Domain, we would like to
propose a revised transaction between NetApp and Data Domain which
we believe offers Data Domain's stockholders a superior combination
of risk-adjusted value and transaction certainty than EMC's
unsolicited acquisition proposal.
Pursuant to the terms of the attached
amendment to our existing Agreement and Plan of Merger (the "Merger
Agreement"), we are proposing to revise the Merger Agreement to
deliver $30 per share in total value to Data Domain stockholders,
consisting of $16.45 per share in cash (before any adjustments
described in Sections 2.7(b)(i) and 2.7(b)(ii) of the Merger
Agreement) and $13.55 per share in NetApp stock based on NetApp's
closing share price on June 2, 2009 of $19.34. As with the terms
of our existing Merger Agreement, our amended Merger Agreement
would include a 10% symmetrical collar, centered on a midpoint
derived from NetApp's closing share price of $19.34. Accordingly,
the exchange ratio for the stock component of the merger
consideration set forth in the amended Merger Agreement would be
equal to (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. In order to maximize deal certainty, NetApp would expect
to use cash to settle the low end of the collar. Under the terms
of our proposal, all other terms of the amended Merger Agreement
would remain unchanged from those set forth in the existing Merger
Agreement.
We believe this proposal offers Data Domain
stockholders more compelling risk-adjusted value than EMC's current
acquisition proposal for several reasons. First, it offers a
combination of value certainty - through the cash and the collar -
coupled with the potential for long-term value upside through the
ongoing ownership of NetApp stock. Second, the stock portion of
the transaction consideration is expected to be tax-free to Data
Domain stockholders. And third and potentially most important, we
believe that a combination of Data Domain and NetApp offers clearly
superior transaction certainty. Unlike a combination of Data
Domain and EMC, which has substantial product overlap and which we
believe will face significant regulatory challenges, a combination
of Data Domain and NetApp has no meaningful regulatory risk.
We look forward to discussing the terms of
this proposal in greater detail at your earliest convenience. For
your convenience and to express the sincerity of our intent, we
have included a signed copy of our proposed amendment to the Merger
Agreement. We note, however, that this proposal and the Merger
Agreement amendment attached hereto are non-binding and we reserve
the right to withdraw this proposal and the Merger Agreement
amendment at any time unless and until the signed copy of the
Merger Agreement amendment attached hereto is counter-signed by
Data Domain and returned to us without any revisions thereto. Any
purported revisions to the attached Merger Agreement amendment
shall not be accepted by us and shall be considered void,
notwithstanding the execution thereof by Data Domain.
Sincerely,
Steven Gomo