The Battle for Data Domain; Has Data Domain Conceded the Application of Revlon to the Data Domain/NetApp Merger?

In my post of June 24, 2009, I addressed the possible application of Revlon to the negotiations conducted by Data Domain with NetApp, concluding that it is likely that the application of Revlon to the negotiations will be vigorously contested by Data Domain and its board. I discuss herein whether Data Domain has conceded the issue by its response to the June 1, 2009 EMC announcement of its all-shares, all-cash $30 per share tender offer to Data Domain’s stockholders.

EMC announced its offer on June 1, 2009, and sent a letter to Data Domain’s CEO, Frank Slootman, the same day. The Data Domain board met to address the offer that very day, and concluded, after input from its counsel, Fenwick & West, and its banker, Qatalyst, “that EMC’s announcement of the EMC Offer was reasonably likely to lead to a Superior Proposal (as that term is defined in the Initial NetApp Merger Agreement).” Data Domain Schedule 14D-9, dated June 15, 2009, at 13.

The Data Domain/NetApp Merger Agreement contains a no-shop clause, subject to the right and power of the Data Domain board to respond to an unsolicited acquisition proposal as long as several conditions are met, including:

“(i) the Company Board shall have determined in good faith (after consultation with its financial advisor and its outside legal counsel) that (A) such Acquisition Proposal either constitutes or is reasonably likely to lead to a Superior Proposal and (B) the failure to take such action is reasonably likely to result in a breach of its fiduciary duties to the Company’s stockholders under Delaware Law; . . . .”

Merger Agreement § 6.1(c)(i) (emphasis added).

So the Data Domain board had to conclude not only that EMC’s $30 tender offer proposal constituted or was reasonably likely to lead to a “Superior Proposal,” but also that Data Domain’s failure to engage EMC over its offer would be “reasonably likely to result in a breach of its fiduciary duties to the Company’s stockholders under Delaware Law . . . .”

If Data Domain’s position will be that Revlon does not apply to their negotiations with NetApp, on the grounds that the deal was negotiated at arms-length and approved by a board of independent directors, is consistent with Data Domain’s strategic vision, and will not involve a change in control of Data Domain (by reason of the stock to be received in NetApp by Data Domain’s stockholders), à la Paramount Communications, Inc. v. Time Incorporated, 571 A.2d 1140 (Del. 1990), In re Santa Fe Pacific Corporation Shareholder Litigation, 669 A.2d 59 (Del. 1995), and Arnold v. Society for Savings Bancorp, Inc., 650 A.2d 1270 (Del. 1994), then why did the Data Domain board conclude, after taking into account the advice of Fenwick & West, that failure to engage EMC over its proposed tender offer would be “reasonably likely to result in a breach of its fiduciary duties to the Company’s stockholders under Delaware Law”?