Broadcom takes $764 million offer directly to Emulex shareholders

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Broadcom and Emulex both make equipment for connecting data centers such as this one. Credit: clayirving via Flickr

Spurned by Emulex’s board of directors, Broadcom this morning said it would take its $764-million cash offer directly to the Costa Mesa company’s shareholders.

Broadcom, which makes networking equipment that lets servers talk to one another, today also filed a petition with the Securities and Exchange Commission seeking a special meeting of Emulex shareholders to repeal a ‘poison pill’ provision designed to thwart unwanted suitors. Emulex shareholders adopted the provision in January, following a call from Broadcom in December to discuss a potential acquisition.

Coincidence? Emulex Chief Executive Jim McCluney said his company, which makes adapters that allow data centers to communicate with servers, was simply renewing a similar provision put in place in 1999 and due to expire on Jan. 19. The provision, triggered when a single shareholder accumulates at least 15% of Emulex stock, would grant other existing shareholders the right to buy preferred shares that would void the voting rights of the shareholder who acquired 15% or more.

Across town in Irvine, Broadcom Chief Executive Scott McGregor saw the poison pill as a sign of Emulex’s ‘intransigence,’ according to a statement. McGregor reminded investors that his offer of $9.25 a share constitutes a 40% premium over Emulex’s closing price the day before the bid was announced.

Trouble is, investors are calling McGregor’s bluff. Believing that he will either raise his offer or trigger a bidding war that would result in a higher sale price, investors have pushed Emulex shares above $10 since April 22, the day after Broadcom’s offer was revealed.

-- Alex Pham