April 21, 2009, 10:44 AM — Following a rejection of efforts to purchase the company in January, Broadcom on Tuesday made an unsolicited bid to purchase Emulex for US$764 million.
Broadcom sent a letter to Emulex's board of directors Tuesday offering to buy all outstanding shares of Emulex common stock for US$9.25 per share, a 40 percent premium of the closing price of Emulex's stock on Monday, according to Broadcom.
Both companies are based in Orange County, California -- Emulex in Costa Mesa and Broadcom in Irvine. Broadcom produces semiconductors used mainly in communications products, such as communications networks, cell phones and cable set-top boxes. Emulex provides technology for connecting storage, servers and networks in data centers.
In the letter, Broadcom President and CEO Scott McGregor reiterated his belief that the deal makes sense for both companies. He said Broadcom is going public with its offer following the breakdown of talks between the companies in January and subsequent poison-pill tactics by Emulex to avoid further engagement.
"It is difficult for us to understand why Emulex's Board of Directors has not been open to consideration of a combination of our respective companies," he wrote. "We would much prefer to have engaged in mutual and constructive discussions with you. However this opportunity is in our view so compelling we now feel we must share our proposal publicly with your shareholders."
In a statement Tuesday Emulex confirmed it received the bid from Broadcom and said its board is reviewing the proposal.
Broadcom wants Emulex mainly for its Fibre Channel storage-networking expertise, according to McGregor, and thinks the deal would benefit shareholders, customers and employees of both companies for several reasons. Not only would Emulex shareholders receive a premium on their shares, he said, but the combined company, which has little product overlap, could use its portfolio to provide low-cost, network-converged storage and networking to customers, he said.
The logistical and cultural integration of the companies would be fairly painless as well, McGregor said, because their offices are close to one another and both companies mainly employ highly-skilled engineers.
"We have a great deal of respect for the technical achievements of the Emulex team, and believe the continued motivation and productivity of Emulex's employees is critical to our combined success," he wrote. "Broadcom has a culture rich in innovation, high quality execution, and a willingness to invest aggressively in the development of new technologies -- all of which spell opportunity for the employees of a combined company to do great things."