Emulex Rejects Broadcom Offer

Emulex said May 4 it was rejecting a $764 million all-cash offer from Broadcom, claiming Broadcom has significantly undervalued the company. When Broadcom made the offer at $9.25 per share on April 21, it represented a 40 percent premium over Emulex's April 20 closing price of $6.61.

Emulex, a developer of converged network solutions for data centers, characterized chip maker Broadcom's offer as a low-ball attempt in a down market. Broadcom said its April 21 offer was not a hostile takeover attempt, but filed a lawsuit to block a poison pill provision that the Emulex board approved.

"After a thorough review of the proposal in consultation with our advisors, the Board unanimously concluded that it is an opportunistic attempt by Broadcom to capture substantial current and long-term value that properly belongs to Emulex stockholders," Emulex Chairman Paul F. Folino said in a statement. "The Board is very enthusiastic about Emulex's future prospects and the long-term value we expect to deliver through the company's current strategy."

Jim McCluney, president and CEO of Emulex, added, "As Broadcom is uniquely aware, Emulex has recently won tier-one original equipment manufacturer contracts at the expense of Broadcom and our other competitors, and as such, we are well-positioned to gain share in this rapidly growing segment."

In a letter from the Emulex board to Broadcom, the company claims the offer "is clearly timed to take advantage of Emulex's depressed stock price during the current unprecedented macroeconomic conditions. Emulex's stock price has traded well above the proposal price within the last 12 months."

Broadcom said its preference is to proceed in a "friendly, collaborative manner, and we hope that Emulex's board will see the merits of this combination and appreciate the substantial value being offered to its shareholders."

Broadcom especially values Emulex for its technology used in transporting information from data centers to storage systems.

"A combination of Broadcom and Emulex addresses our customers' growing need to apply the economics of Ethernet to the Fibre Channel storage space to achieve low-cost network converged solutions," McGregor said in a statement. "The logical evolution of the enterprise network is for a transition to a converged fabric architecture that incorporates a broad array of technologies."