Broadcom Corp. may have to up the ante for Emulex Corp., according to analysts.
Last week, Irvine-based Broadcom went public with a $764 million offer for Emulex, which the Costa Mesa maker of electronics for data storage networks rejected in December.
The bid was worth 40% more than what Emulex was trading at before news of the offer broke. Even so, Emulex, like a homeowner who still remembers what his house used to be worth, may be reluctant to sell at what it considers to be a discount.
Most industry watchers agree Broadcom will have to pony up more money to entice Emulex to the negotiating table.
“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.
Emulex’s stock was off 50% for the past 12 months before surging last week. The company had a market value of about $850 million last week, after investors bid up the stock beyond Broadcom’s offer on speculation that a higher bid could come.
Shares of Emulex peaked in early 2001 when the company had a market value of more than $6 billion.
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.
“We view this acquisition positively, assuming it does not distract management too much or cost more than $1 billion to consummate,” Berger said in a research note.
Emulex might hold out to see if other players enter the bidding.
For more on this story, read the April 27 issue of the Business Journal.
