EMC to acquire Zip drive maker Iomega by for $213 million
09 April 2008
Iomega, the data storage company that once revolutionized portable storage technology with its famous Zip drives, has agreed to be acquired by Fortune 500 software company EMC Corporation after spurning a competing offer from ExcelStor Great Wall Technology, a hard disk maker backed by the Chinese government.
EMC Corporation is a manufacturer of software and systems for information management and storage. It is headquartered in Hopkinton, Massachusetts, USA. EMC produces a range of enterprise storage products, including hardware disk arrays and storage management software, and reported annual revenue of $13 billion last year.
The Iomega Corporation is a supplier of portable computer storage devices and media. The corporation, established in 1980, has 208 employees at present. Iomega is headquartered in San Diego, California, with other offices in Utah, Singapore, and Switzerland. The company posted annual revenue of $336 million in 2007.
Prior to this deal, which values Iomega at $213 million or $3.85 per share, the company had rejected two earlier offers from EMC of $178 million and $205.5 million respectively. In fact, before the EMC offer, Iomega had considered merging with ExcelStor Great Wall in a transaction in which the former would have been a minority shareholder with a 40-per cent stake.
Negotiations were at an advanced stage and Iomega will be required to pay $7.5 million to ExcelStor Great Wall in separation fees. Interestingly, this amount is the exact difference between the second and final EMC offers.
Although the ExcelStor Great Wall deal would have made Iomega part of a much bigger company, the potential payoff from the ExcelStor Great Wall merger was uncertain, according to analysts, whereas now, the shareholders reap immediate benefits. Also, the US government may not have looked kindly on the Chinese deal, just as it successfully opposed Huawei's attempt to grab a 21.5 per cent stake in US networking specialist 3Com last year.