Network components manufacturer Emulex has rejected Broadcom's revised cash offer. Broadcom, which had already indicated this latest offer would be its last, said it was dropping all efforts to acquire Emulex.
"We believe it is in the interest of each company's stakeholders to complete a transaction expeditiously or to move on," Broadcom CEO Scott A. McGregor said . "Although we were unable to negotiate an expeditious and friendly transaction at a price that makes sense to us, given the expectations set by the Emulex board, there are other value-creating alternatives that we will now turn our attention to as we position Broadcom to capitalize on the emerging opportunities in the converged enterprise networking markets."
Broadcom did not hide its disdain for the Emulex decision: "Because of Emulex's rejection, coupled with its previous adoption of a poison pill ... Broadcom does not expect that the conditions to close its tender offer will be satisfied," the company said.
The "poison pill" Broadcom referred to was a change to Emulex's bylaws in January aimed at stopping any hostile takeover attempt by giving Emulex shareholders the right to purchase additional stock in case any company or group acquired more than 15 percent of its shares. Broadcom had indicated it wanted to buy out Emulex as early as December 2008.
This is the second time Emulex's board advised stockholders to ignore a Broadcom merger proposal. In May, the board rejected of about $764 million in cash, saying it undervalued the company and its long-term earning potential. The latest all-cash offer was valued at $925 million.
Emulex's board essentially said the same thing about the Broadcom offer as it did in May, adding that the deal was "not in the best interests of Emulex and its stockholders."
"We unanimously believe Emulex will deliver significantly more value than Broadcom's revised offer through the Company's rapidly developing converged networking business and solid execution in our host server and embedded storage markets," said Paul Folino, Emulex's executive chairman. "Consistent with the Board's fiduciary duties, we would, of course, give full consideration to a bona fide offer from any party that reflects the full value of the company."
Emulex has about 850 employees and primarily makes Fibre Channel host bus adapters for attaching application servers to storage-area networks as well as network interface cards for attaching network-attached storage systems. It also developed host bus adapters based on the Internet SCSI (iSCSI) and Fibre Channel over Ethernet (FCoE) protocols.
Emulex CEO Jim McCluney said the fourth-quarter earning projections underscore the success of the company's strategic initiatives. "We recently secured two new tier-one 10Gbit/s Ethernet OneConnect Converged Network Adapter design wins, adding to the twelve wins that we disclosed in May. In recent weeks, we also secured two new OEM design wins for our LightPulse Fibre Channel Host Bus Adapters," he said.