ADIC Makes Hostile Bid For Overland

Redmond, Wash.-based ADIC, which in August purchased just over 9 percent of San Diego-based Overland's shares, said in an SEC filing on Tuesday that it intends to acquire the storage manufacturer.

ADIC manufactures midrange and enterprise-class tape automation products, disk-based backup arrays, and storage management software, while Overland focuses on entry-level and midrange tape automation. Overland also has a disk-based backup appliance family, and in August acquired Zetta Systems, a developer of storage software that Overland is using develop its first line of primary storage arrays.

Overland declined to comment on the move but it appears the company is not open to a buy-out.

ADIC Chairman and CEO Peter van Oppen said in an open letter Tuesday to top Overland executives that his company is disappointed Overland has declined to engage in discussions with ADIC on the possibility of being acquired.

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"We continue to believe that a combination of ADIC and Overland would be of significant benefit to our respective shareholders," van Oppen said in the letter, which was filed with the SEC. "Accordingly, ADIC is prepared to offer to acquire all of the outstanding shares of Overland common stock."

This differs from statements from ADIC made when it purchased the Overland shares. At that time, ADIC's only comment was that it has previously invested in storage partners and competitors, including StorageTek and Quantum.

Though Overland executives have yet to issue a comment on ADIC, there is some indication they have takeover concerns. Overland executives in late August adopted a shareholder rights plan as protection against what they called "abusive or coercive takeover tactics" in a statement issued at the time.

van Oppen, in his letter to Overland, referred to that plan as a "poison pill," and said that his company's offer of $7.90 a share for Overland assumes "that a transaction will be negotiated on a friendly basis, and that Overland does not in the interim implement additional change-in-control protections for management or otherwise materially alter its business, including agreeing to unusual customer provisions."

More than half of Overland's sales come from the channel, with the rest coming from OEM deals, including from Hewlett-Packard, which this summer said it is ending that OEM relationship.

Overland does not have any direct sales, a fact which makes the vendor a favorite of many of its channel partners. ADIC, on the other hand, has both direct and indirect sales.

It is ADIC's direct sales efforts that has some Overland solution providers concerned about any possible acquisition of Overland.

One solution provider who works with both companies said that he is satisfied with Overland's channel program, but can't say the same about ADIC. "ADIC does a lot of direct sales, and Overland doesn't," he said. "If they take Overland over, what are their plans? Are they going to screw with Overland's channel programs? Let it run as a separate organization? We need to know."

If Overland is taken over, it will be important for ADIC to keep Overland's channel programs, said John Zammett, president of HorizonTek, a Huntington, NY-based solution provider.

"If ADIC were to preserve the Overland channel programs, possibly keep it as a separate division, and keep their channel partners—they have good partners—and their programs, then ADIC can both work with the channel and preserve their direct sales force," Zammett said.

Mike Fanelli, western regional manager at SSI hubcity, a Metuchen, N.J.-based Overland solution provider, said he is confused by the sale, and guesses that ADIC is looking to fill a hole in their product line by acquiring Overland.

"They'd be picking up the low-end tape and disk products, and Zetta," he said. "But that seems to be pretty expensive. Maybe Overland is better at the SMB space than ADIC, which gets Overland's customers when buying the company."