While the offering in a letter from Broadcom president and CEO Scott McGregor to Emulex's board chairman was couched in friendly terms, McGregor indicated that the offer would be presented directly to Emulex stockholders, if necessary.
"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 McGregor 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. Our combined entity can be a one-stop shop for key networking and storage technologies for the enterprise and for our industry."
McGregor noted that the offer is a 40% premium over Emulex's closing stock price on Monday. He expects an Emulex acquisition would be accretive to Broadcom's earnings in 2010. The Broadcom chief also observed that Broadcom has a long experience of successfully integrating some 40 acquisitions.
McGregor went on to argue that there is little customer overlap between the products of both companies and that the engineering departments of both firms would complement each other. He also praised Emulex's expertise in storage, host bus adapters, and diversified channels as representing advantages to the combined offerings of both companies. Both are located in Orange County, California.
In McGregor's letter to Paul Folino, executive chairman of Emulex's board of directors, he indicated that Broadcom is prepared to pursue a hostile acquisition campaign if the board doesn't capitulate. McGregor referred to an earlier attempt in recent months by Broadcom to acquire Emulex:
" We sought to engage you and your Board of Directors in discussions in late December regarding a potential combination of Emulex with Broadcom," McGregor wrote. "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." McGregor added that Emulex had then adopted "poison pill" and other measures to thwart Broadcom's overtures.
In another development Tuesday, Broadcom reported a first-quarter loss of $91.9 million on revenue of $853.4 million. In the year-earlier quarter, it reported a $74.3 million profit and revenue of $1.03 billion.
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