This merger will marry EMC’s corporate and enterprise data storage and with Iomega’s business and personal data storage.  The addition of Iomega’s products, brand name, distribution channel and industry expertise will also bring EMC into the rapidly-growing consumer and small business markets.

Iomega subsequently announced the termination of a share purchase agreement With ExcelStor entities, and Iomega has paid a $7.5 million break-up fee to the group as a result.

This is one of those mergers that should have been expected by now since Iomega had already gotten a sweetened buyout offer from EMC and ultimately acknowledged that it was a superior transaction to what it had on the table with ExcelStor.  EMC intends to commence the tender offer in the next two weeks, and it expects to complete the tender offer expected in the second quarter of 2008

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Iomega shares closed down 1% at $3.64 today in regular trading and shares are up close to 5% at $3.81 in after-hours.  That leaves barely 1% arbitrage for a merger that has already been approved and is almost certainly a done deal.

Jon C. Ogg
April 8, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Iomega’s board of directors has determined that the revised acquisition proposal would reasonably constitute a superior proposal from ExcelStor.  As permitted by the ExcelStor Purchase Agreement, Iomega’s board of directors has authorized Iomega to furnish information to EMC and enter into discussions with it regarding its most recent proposal.

As part of the ExcelStor Purchase Agreement, Iomega must provide the Selling Shareholders with at least 2 business days notice prior to entering into discussions with or furnishing any information to EMC in response or with respect to the EMC acquisition proposal. Iomega did provide notice to the selling shareholders on Friday, March 14, 2008.  In December, 2007, Iomega signed a merger agreement with ExcelStor to issue some 84 million shares in exchange for all outstanding ExcelStor common stock.

A week ago, Iomega rejected a prior $3.25 per share buyout offer from EMC.  As far as how this ranks, Iomega has seen shares trade between $2.26 to $5.75 over the last 52-weeks.  This merger dance may not yet be over, but this time EMC is warming up to the idea.

Jon C. Ogg
March 17, 2008

The company announced that it has received an unsolicited acquisition offer from EMC Corp. (NYSE: EMC) for $3.25 per share.  Apparently the board of directors has determined during a weekend board meeting that the unsolicited offer falls short of a proposed share purchase agreement with ExcelStor Great Wall Technology Limited, Shenzhen ExcelStor Technology Limited, Great Wall Technology Company Limited, ExcelStor Group Limited, and ExcelStor Holdings Limited.

Iomega noted that it made the determination based on valuation and a view that EMC used overly broad diligence consistencies.  Iomega and ExcelStor Holdings Limited are currently in the process of gaining regulatory and stockholder approval for the share purchase agreement announced December 12, 2007.

Iomega’s stock has traded as low as $2.26 and as high as $5.75 over the last year.  Despite many troubles or at least fierce competition, it’s really no surprise that Iomega would snub this offer.  Shares closed at $2.66 Friday and are up at $2.95 shortly after the open.

Jon C. Ogg
March 10, 2008

Interestingly enough, the company actually raised its guidance this morning, and this was from guidance that was just issued back on December 12, 2007.  The company put its Q4 net revenue in a $117 to $121 million range.  It also put net income at $0.09 to $0.11 on a fully diluted basis and non-GAAP earnings at $0.06 to $0.08 EPS.  Previous guidance was $92 million in revenue on non-GAAP EPS on $0.04.

The non-GAAP estimates include a $3.5 million one-time pre-tax benefit related to a prior license of intellectual property and pre-tax expenses of $1.2 million for external professional fees related to the acquisition of ExcelStor Group.

It is hard to imagine that this will be taken as bad news, but this sector is still one that many feel has passed Iomega by and left it in the rear view mirror.  It has made much effort to get into portable media storage and offers large portable drives of 500 GB now for only about $220.00, so it is far removed from being that little Zip Drive company we once knew.  Its balance sheet is also in good shape for a small cap stock.

Iomega share closed at $2.35 Friday, and the 52-week trading range is $2.26 to $5.75.  Its market cap is now only $128.7 million.  We can’t call this one a comeback yet, but you might have some of the old long-term believers at least a little happier today.

Jon C. Ogg
January 22, 2008

Jon C. Ogg
September 20, 2007