Irvine’s Broadcom Corp. appears to have done an about-face Monday in its efforts to buy Costa Mesa’s Emulex Corp.
In a widely anticipated move, the Irvine-based chipmaker upped its offer after the two companies have been locked in a bitter takeover battle for more than two months.
But what was a surprise was Broadcom’s switch to a less aggressive stance, with plans to drop a lawsuit and to stop addressing Emulex’s shareholders.
Broadcom said after the close of trading on Monday that it’s offering $912 million for the maker of electronics of data storage networks, up from its previous offer of $764 million in cash.
The new offer represents a 1% premium on Emulex’s shares, which have been bid up on investor speculation of a higher Broadcom bid.
Investors further drove up Emulex’s shares by 3% in afterhours trading on a recent market value of about $900 million.
Broadcom contends that if it had not made an offer, Emulex’s shares wouldn’t have seen the bullish run in the past two months.
Broadcom came to its new offer by comparing Emulex to its closest rival, Aliso Viejo’s QLogic Corp.
QLogic has seen its shares rise nearly 8% since April 20, the day before Broadcom went public with its original offer.
Broadcom figures that Emulex would only be worth about $585 million,following QLogic’s trajectory,if its offer hadn’t caused the stock jump. Its newest price represents a 55% premium on that figure.
Broadcom said it’s set to extend its new offer until July 14. If Emulex doesn’t act on the deal, Broadcom said it will let the offer expire.
In addition to the higher offer, Broadcom appears to be backing off its aggressive stance.
In the same announcement, Broadcom said it’s set to stop soliciting consent from Emulex’s shareholders to hold a special meeting that would change Emulex’s bylaws.
“Our goal from the start of this process was to negotiate a friendly and timely transaction,” Broadcom Chief Executive Scott McGregor said in a letter to Paul Folino, Emulex’s executive chairman. “In a final effort to engage Emulex’s current board, we will cease soliciting consents from Emulex’s stockholders.”
Broadcom said it will also drop a Delaware lawsuit it filed earlier this year against Emulex that sought to get rid of some of the so-called “poison pill” initiatives that Emulex enacted to fend off a buyout.
“Since last December, we have sought to engage Emulex constructively and professionally,” McGregor said. “We hope this new approach will lead to a mutually beneficial dialogue and, ultimately, to a friendly transaction.”
McGregor again made its case as to why the deal would be a good fit.
“Broadcom’s technology, scale, track record of execution and highly successful history of acquisitions, along with Emulex’s considerable strengths today would make a terrific combination for our combined employees and our customers.”
McGregor said if the deal didn’t go through, Broadcom was prepared “to consider other alternatives” and that the company had “other value-creating opportunities.”
“We believe it is in the interest of each company’s stakeholders to complete a transaction expeditiously or to conclude that we cannot, and move on,” he said in a statement.
Emulex could not be immediately reached for comment after Broadcom’s announcement Monday.
Last week, Broadcom was dealt a roundabout blow after two shareholder advisory firms recommended against a deal and shot down Broadcom’s attempts to change Emulex’s bylaws, which would have put board members in place that were favorable to the chipmaker.
For more on the recommendations of the advisory firms,
read last week’s Business Journal article.
The takeover bid centers on a rivalry for customers for a new technology that promises to bring the speed and efficiency of special data storage networks to everyday networks of servers and desktop computers.
A war of words developed over the past few months as the two companies sparred in the public eye.
For more on the deal’s back story,
read a recent Business Journal article.
