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Broadcom Sticks to Emulex Offer, Goes to Shareholders

Irvine-based Broadcom Corp. is taking its $764 million offer for Costa Mesa’s Emulex Corp. directly to shareholders after Emulex directors twice rejected the bid.

Broadcom, a maker of chips for servers, networking gear, consumer electronics and wireless phones, said Tuesday it is sticking with,and not raising,its offer.

It’s seeking to acquire shares from stockholders from now until June 3 in the hopes of going around Emulex’s board to acquire a majority of the maker of data storage electronics.

After the close of trading on Tuesday, Emulex acknowledged Broadcom’s latest move in a statement and urged shareholders “not to take any action.”

Broadcom could face a tough sell.

Investors have driven up Emulex shares to a market value of $870 million at early Tuesday trading,13% more than Broadcom’s offer,on speculation Broadcom would up its offer to entice Emulex’s reluctant directors and management.

“While the offer is reasonable, the key is Emulex’s board accepting it, which may require more negotiations and a higher bid,” said Randy Abrams, an analyst at Credit Suisse Securities LLC in New York.

FBR Capital Markets & Co. analyst Craig Berger said he doesn’t think a deal will happen for less than $910 million, with $990 million being the high end.

On Monday, Emulex Chief Executive Jim McCluney rejected Broadcom’s offer as “opportunistic.”

“We felt it significantly undervalues Emulex’s long-term prospects,” he said.

According to McCluney, Broadcom recently lost out on deals with makers of data storage computers to Emulex and now is trying to acquire the business.

Broadcom, which first approached Emulex in December and went public with its offer on April 21, said it’s asking regulators to allow Emulex shareholders to change the company’s bylaws to allow owners of 10% or more of Emulex to call a special meeting to vote on the offer.

The hostile bid has made waves in Orange County’s technology industry, as it involves some of the sector’s best known names,Broadcom’s Henry Samueli and Chief Executive Scott McGregor, and Emulex’s Paul Folino and McCluney.

Language in dueling press releases has gotten occasionally tense, with a sharp rebuke from Emulex Executive Chairman Folino on Monday and Broadcom’s response on Tuesday.

On the assertion that Broadcom is trying to buy business it couldn’t win in competition with Emulex, the chipmaker said Emulex “has failed to demonstrate an ability to convert design wins into either revenue growth or market share.”

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