Converged networks developer Emulex sent a letter May 26 to stockholders urging them to reject the unsolicited, nonbinding $9.25-per-share offer from Broadcom, which initiated a $764 million takeover offer in May. Emulex has characterized the offer as a lowball attempt in a down market.
Broadcom's $9.25 per share represents a 40 percent premium over Emulex's April 20 closing price of $6.61 per share. Broadcom has maintained that the offer is not a hostile takeover bid, but filed a lawsuit to block a poison pill that the Emulex board approved. In addition, Broadcom is also seeking from Emulex stockholders a preliminary consent solicitation statement to amend Emulex's bylaws to allow stockholders to call a special meeting.
"We are pleased to hear from the stockholders we have spoken with that you agree that Broadcom's offer significantly undervalues Emulex and that it is an opportunistic attempt to capture significant value that rightly belongs to all of you. We continue to strongly urge you to not tender your shares into Broadcom's tender offer," Jim McCluney, Emulex's president and CEO, wrote in the May 26 letter.
Calling the Broadcom offer "grossly inadequate," McCluney said Broadcom's tactics prove Emulex has an early lead over Broadcom in the converged networking space and show Broadcom's inability to effectively compete.
"Converged networking is widely recognized as a critical emerging technology for the data center, and Emulex has beaten Broadcom to provide the complete solution required to address this market," McCluney wrote. "In our view, Broadcom is well aware that it does not have the technology to compete due to its lack of Fibre Channel capability-an integral component to the technological offering."
McCluney also urged Emulex's stockholders to reject Broadcom's move to amend Emulex's bylaws, claiming it is an attempt remove Emulex's board and appoint Broadcom's hand-picked nominees.
"We believe these nominees, if elected, will pursue Broadcom's self-serving agenda of acquiring Emulex on the cheap to the detriment of Emulex's stockholders. Please understand that providing your consent to Broadcom will increase Broadcom's leverage and provide no benefit to you," McCluney wrote.