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» VIEW ALL POSTS May 15 2009   3:22PM GMT

Deja vu: Emulex rejects Broadcom



Posted by: Dave Raffo
Tags:
storage networking
storage vendors

Emulex rebuffed Broadcom again today, advising its shareholders to reject the cash tender offer Broadcom made May 5 in its latest attempt to acquire Emulex.

If you’ve been following this story, today’s news is no surprise. Since Broadcom first went public with its offer of $9.25 per share April 21, Emulex executives have claimed the offer undervalued the stock and that Emulex could do better on its own. The Emulex board rejected Broadcom’s original offer in December, then on May 4 it publicly declined the Broadcom offer. Broadcom then decided to make its offer directly to the Emulex shareholders.

The reasons cited by Emulex today:

  • Significantly undervalues Emulex’s long-term prospects and does not adequately compensate stockholders for their shares;
  • Is opportunistic, given that Broadcom was aware of significant new non-public design wins by Emulex in converged networking prior to making its proposal on April 21, 2009;
  • Does not compensate Emulex’s stockholders for a range of other initiatives being undertaken by Emulex that will start to meaningfully impact earnings within the next year and beyond;
  • Is clearly timed to take advantage of Emulex’s depressed stock price, which has been impacted by the current unprecedented negative macroeconomic conditions;
  • Is funded in significant part by Emulex’s own cash resulting in Broadcom offering only $5.59 per share for the operations of
    Emulex; and
  • Is highly conditional, creating substantial uncertainty as to whether Broadcom would be required to consummate the Offer.

Broadcom’s offer to Emulex shareholders expires June 3. The Ethernet chipmaker is looking to acquire Emulex’s Fibre Channel technology to position itself for the consolidation of storage and server networks expected to take place over the next few years.

Emulex’s stock opened today at $10.52.

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