Data storage provider EMC Corp. said Tuesday it would acquire Iomega Corp. for $213 million, expanding EMC's offerings targeting small businesses and consumers.
The price is a 20 percent increase over EMC's initial bid of $178 million, or $3.25 per share. Iomega, a San Diego-based storage company best known for the Zip drive, had rejected that offer earlier this year, calling it inferior to a proposed all-stock transaction that Iomega had reached in December with a stockholder.
Hopkinton, Mass.-based EMC came back with a $3.75-per-share offer totaling $206 million. Further talks led to Tuesday's all-cash agreement at $3.85 per share, which is 5.8 percent higher than Iomega's Tuesday closing price of $3.64.
With Iomega's acceptance of EMC's bid, Iomega said it paid a termination fee of $7.5 million to the shareholders in the canceled deal.
Under that proposal, Iomega would have acquired China's ExcelStor Group from Great Wall Technology Co. Ltd., which is an Iomega shareholder and parent company of ExcelStor. Great Wall Technology would have held a majority stake in Iomega, and ExcelStor would have operated as a wholly owned Iomega subsidiary.
EMC's storage services are largely geared toward corporate clients, and acquiring Iomega is expected to expand EMC's business with small businesses and consumers.
"In addition to industry-leading products and a household consumer brand, Iomega brings to EMC a deep knowledge of and established business practices for servicing consumers and small businesses," said Joe Tucci, EMC's chairman, president and chief executive.
Iomega, a 28-year-old company with about 300 employees, is best known for the more than 50 million Zip storage drives and 300 million Zip disks it has sold since 1995.
But with more advanced storage technologies replacing Zip disks, Zip products now make up a small share of Iomega's current storage business, which is focused on such successor technologies as the Rev backup drive, as well as storage accessed via computer networks.
"Once the acquisition is final, Iomega will be able to fully leverage EMC's vast assets to grow our business globally," said Jonathan Huberman, Iomega's chief executive.
EMC and Iomega announced their agreement after EMC's shares fell 6 cents to close at $3.64, and Iomega's shares fell 4 cents, to $3.64. The deal is expected to close by the end of June.
EMC said the acquisition should not have any material impact on its full-year earnings.
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