SAN JOSE, Calif. -- Amid a loss and a drop in sales for the quarter, Broadcom Corp. has made an unsolicited bid to acquire storage-equipment maker Emulex Corp. for $9.25 per share in cash or $764 million.
Broadcom approached Emulex about an acquisition in the past, but Emulex turned Broadcom down. Instead, Broadcom is now going the hostile route. In fact, it has taken legal action against Emulex.
Broadcom said its offer represents a 40 percent premium above the closing price of Emulex common stock on April 20, a 62 percent premium to trailing 30 day average price per share and an approximately 85 percent premium to enterprise value.
Broadcom (Irvine, Calif.) believes that its efforts in Ethernet networking, coupled with Emulex's expertise in Fibre Channel storage networking, will accelerate the development of solutions for enterprise networks.
"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," said Scott McGregor, president and chief executive of Broadcom, in a statement.
"Our 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," he added.
In a letter, McGregor said Broadcom's recent offer to buy Emulex was turned down. ''With that strategic opportunity to meet the needs of the market in mind, we sought to engage you and your board of directors in discussions in late December regarding a potential combination of Emulex with Broadcom,'' he said in the letter.
''We were disappointed when, in early January, you responded that the company was not for sale and abruptly cut off the possibility of further discussions. Even more troubling was the fact that merely one week after that communication, you took actions clearly designed to thwart the ability of your shareholders to receive a premium for their shares,'' he said.
''These included adopting a 'poison-pill' and amending your bylaws. It is difficult for us to understand why Emulex's board of directors has not been open to consideration of a combination of our respective companies,'' he said. ''We would much prefer to have engaged in mutual and constructive discussions with you. However this opportunity is in our view so compelling we now feel we must share our proposal publicly with your shareholders.''