Shares of Costa Mesa-based Emulex Corp. plunged Tuesday as investors feared the company’s management could drag on a two-month takeover drama, despite a higher offer from Irvine’s Broadcom Corp. on Monday.
Emulex’s stock was down about 9% in afternoon New York trading on a market value of about $825 million. The drop came after a bounce in Emulex’s shares during afterhours trading Monday.
Irvine chipmaker Broadcom said after the close of trading Monday that it’s offering $912 million for Emulex, up from its previous offer of $764 million.
The company also said it’s dropping a lawsuit against Emulex designed to make its hostile takeover bid easier.
But investors Tuesday seemed to latch on to Emulex’s hesitancy. The company said in a statement it would review the higher offer and urged shareholders not to sell their stock to Broadcom.
That sparked fears among some that Emulex’s directors could seek a higher bid and prolong a takeover drama that’s been markedly nasty at times.
The new offer is 1% more than what Emulex’s shares closed at on Monday. The stock has been bid up on investor speculation of a higher Broadcom bid.
Broadcom said it 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 said it figures that Emulex only would 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.
For more on Broadcom’s higher offer,
read Monday’s Business Journal article.
For more on the deal’s back story,
read a recent Business Journal article.
