2nd UPDATE: Emulex Rejects Takeover, Broadcom Ends Pursuit
July 09 2009 - 10:32AM
Dow Jones News
Emulex Inc. (ELX) rejected Broadcom Corp.'s (BRCM) increased
$912 million takeover offer Thursday, saying the bid undervalued
the company's longer-term prospects.
In response, Broadcom ended its efforts to acquire the company
and said it was focusing on other "value-creating alternatives." It
didn't provide specifics.
Emulex shares fell as much as 18% after the rejection, despite
the Costa Mesa, Calif., company also announcing that its fiscal
fourth-quarter results would come in at the high end of its April
projections because of strong operational performance.
The stock's low Thursday of $7.94 was 28% below Broadcom's last
all-cash offer of $11 a share, which had offered a 66% premium to
Emulex' share price before Broadcom's bid was made public this
spring.
Emulex shares have recovered a bit, recently trading at $8.40,
down 13%. Broadcom shares rose 3.2% to $24.10.
Broadcom had been pursuing a takeover of Emulex since late last
year. Broadcom, which makes chips used in communication devices,
has said it wanted to add Emulex' speciality - so-called Fibre
Channel chips that help connect server systems with storage
devices.
In April, Broadcom went public with an unsolicited offer of
$9.25 a share. Late last month, the company raised the bid to $11 a
share and ended its attempts at a hostile takeover by dropping a
lawsuit against Emulex and stopping plans to replace its board.
Despite Broadcom's actions, Emulex remained uninterested in
talking to Broadcom. According to an Emulex filing with the
Securities and Exchange Commission, Emulex did not engage in any
further negotiations with Broadcom or its advisers regarding the
potential acquisition after the revised offer.
Throughout the acquisition struggle, Emulex and Broadcom sparred
over the extent to which Emulex would increase revenue based on
forthcoming business resulting from Emulex' networking technology
for data centers.
Emulex argued it had won current agreements with customers to
use its technology at the expense of Broadcom's products. For its
part, Broadcom questioned the extent to which these design wins
would translate into growth for Emulex.
The takeover battle grew increasingly hostile, with Emulex and
Broadcom both filing lawsuits related to the deal. But due, in
part, to Emulex' shareholder-rights provision, often known as a
"poison pill," it was unlikely Broadcom would succeed in acquiring
the company without the consent of Emulex' board.
Emulex said Thursday it sees results at the high end of an April
forecast that was below analysts' then-expectations. The April view
was earnings, excluding items, of 1 cent to 5 cents a share on
revenue of $73 million to $80 million.
The earnings estimate excludes a host of costs, including
expenses related to the Broadcom bid. Including the costs, Emulex
will report a loss for the quarter ended June 28.
-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155;
jerry.dicolo@dowjones.com
(Tess Stynes contributed to this report.)