June 30, 2009, 2:29 PM — Network components manufacturer Emulex Corp. today said its board of directors will review a new takeover bid by Broadcom Corp., which raised its offer from $9.25 per share to $11. That would make the deal worth about $925 million.
Emulex's board rejected Broadcom's earlier buyout bid, saying the $764 million on the table undervalued the company and that the unsolicited offer "had a hostile element to it."
Broadcom initially indicated in December that it was interested in buying Emulex, but that move was rejected the following month. Then, in April, Broadcom made an initial unsolicited all-cash offer. That offer, also rejected by the Emulex board, represented a 40% premium on price of the company's stock at the time.
Broadcom said its most recent bid would be its last: "The offer represents a premium of 66% to Emulex's closing stock price on April 20, 2009, the day before Broadcom announced its initial offer."
The latest bid is only about 7% over the stock's value as of this morning, however.
"Broadcom recognizes that, in the absence of its offer, Emulex's share price would have continued to fluctuate in the two months since Broadcom's initial offer," the company said. "Had the Emulex stock traded in line with the stock of its closest peer, QLogic Corp. (up 7.6% since April 20, 2009), it would be $7.11 today. Broadcom's revised offer represents a premium to this implied current share price of 55%."
Emulex said it would review the new offer "consistent with its fiduciary duties and with the assistance of its financial and legal advisors, Goldman, Sachs & Co. and Gibson, Dunn & Crutcher LLP, respectively." The board also urged stockholders not to tender any shares into the revised offer pending a recommendation.
The board will make its recommendation to stockholders on the revised tender offer "in due course," a spokesperson said in an e-mail to Computerworld.
In a previous letter to Broadcom, the Emulex board said the company's "future prospects and long-term value are best delivered through Emulex's current strategy."
In a letter to Emulex Chairman Paul Folino yesterday, Broadcom CEO Scott McGregor said combining the two companies would create significant value for respective shareholders, employees, customers and partners. "We believe the best way to realize this value is to act now to capitalize on the opportunities our two companies could create together. Delay -- and its associated business risks and financial costs -- erode the value of a combination."
Emulex, which has about 850 employees, makes Fibre Channel host bus adapters used to attach application servers to storage-area networks and network-attached storage systems.
Emulex also developed host bus adapters based on the Internet SCSI (iSCSI) and Fibre Channel over Ethernet (FCoE) protocols. The company sells to large equipment manufacturers such as IBM, EMC Corp. and Hewlett-Packard Co. for use in storage subsystems. Emulex's chief competitors are Brocade Communications Corp., QLogic Corp. and LSI Corp.
