Emulex 'Reviewing' Broadcom's Takeover Offer

The target of an unsolicited $764 million takeover bid by Broadcom, Emulex is examining its options, the Fibre Channel storage networking company said in a statement.

William Gardner

April 22, 2009

2 Min Read
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Day two of Broadcom's "unsolicited" bid to acquire Emulex is under way with the target firm's lawyers and financial adviser, Goldman Sachs, reviewing the proposal.

"...There is no need for Emulex stockholders to take any action at this time," said an Emulex statement. The company is examining alternatives that, in traditional acquisition scenarios, include seeking alternate suitors to help drive up acquisition price offers.

Broadcom is offering $764 million for Emulex.

In the short statement, Emulex acknowledged the Broadcom offer: "Emulex Corporation ... confirmed that its Board of Directors has received an unsolicited proposal from Broadcom Corporation to acquire Emulex for $9.25 per share in cash."

Emulex has been girding for the Broadcom offer for months after an initial rejection of overtures by Broadcom to acquire the firm and its flagship Fibre Channel storage product. Shortly after the January talks, Emulex adopted a new stockholder rights agreement that would "become exercisable if a person or group acquires 15% or more of Emulex's common stock or announces a tender offer."

Broadcom has called the agreement a "poison pill," which, in investment banking parlance, would make it difficult for any potential acquirer to swallow an acquisition.

Behind the legal and financial maneuvering, however, is the rapid evolution of enterprise data centers. Both firms have staked out data center positions -- Broadcom with its Ethernet offerings and Emulex with its Fibre Channel storage. Those technologies and others are converging in data centers.

"These converged networking solutions promise to enable end users to reduce the overall number of NICs, cables, and switch ports required to run their networks, which in turn lowers overall costs, power and cooling requirements, and reduces the time and expense spent supporting and maintaining multiple distinct networks," said Broadcom president and CEO Scott McGregor in outlining reasons for the acquisition.

In a blog entitled "Leadership vs. Bravado" published after the Broadcom announcement, Emulex president and CEO Jim McCluney wrote: "Lately I have noticed that our competitors have been pounding their chests and spreading FUD in the marketplace in a feeble attempt to reduce the impact of their being badly positioned, with inferior products, in the emerging converged networking market."

Those were fighting words, and McCluney went on to praise Emulex product offerings, although he didn't mention Broadcom or any other company in his blog.

Securities analysts who follow the two companies noted that Broadcom has more than $1.5 billion in cash -- enough to easily pay for an acquisition of Emulex.

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