Broadcom willing to reassess Emulex bid price
(AP) – Broadcom Corp. could reassess the price of its unsolicited takeover of Emulex Corp., which had called its $764 million offer inadequate, if given nonpublic information to justify a new bid, according to a regulatory filing made Tuesday.
In the latest salvo in a bitter takeover attempt, Broadcom CEO Scott McGregor said the company's $9.25-per-share offer for Emulex was based on publicly available information.
"If Emulex can justify a valuation that is not ascertainable from public information, we would consider it," he wrote in an e-mail to Emulex CEO James McCluney that was disclosed in a filing with the Securities and Exchange Commission.
McCluney had called Broadcom's bid "opportunistic," saying the company knew Emulex has won yet-unannounced design contracts with manufacturers, beating Broadcom and other rivals.
"As you know, these design wins are kept confidential at our customers' request and do not typically begin contributing revenue for several quarters," McCluney wrote in an e-mail. "You are uniquely aware of the future value we have secured and how well positioned we are to unseat you on many other platforms in the near future."
McGregor called McCluney last Friday, seeking to reopen talks. McCluney sent a follow-up e-mail, saying Broadcom sought nonpublic information that was "highly competitive and sensitive" – including customer plan details, design wins and financial plans.
Emulex has said that it won 12 new design contracts for converged network adapters and expects fiscal 2012 revenue to climb to more than $600 million. But Broadcom countered that it needed access to private information to verify these claims.
On April 21, Broadcom launched a buyout offer for Emulex, saying its $9.25-per-share bid represented a 40 percent premium to Emulex's stock price in the prior trading day. Emulex rejected the offer as too low, and Executive Chairman Paul Folino said Broadcom wanted to take advantage of stock prices depressed by the nation's financial meltdown.
Both companies do business in the enterprise network market. Enterprise network equipment moves corporate data and communications between computers, servers, mainframes and storage systems. There are two technologies for moving data in this market: fibre channel, which Emulex dominates, and Ethernet, which is Broadcom's area. But technology has emerged to combine the two, called Fibre Channel over Ethernet, or FCoE, which costs less to deploy.
Emulex and partner ServerEngines are in FCoE, but not Broadcom. In a twist, the co-founder of ServerEngines, Raju Vegesna, was a former Broadcom executive who was publicly fired, the regulatory filing said. Broadcom later settled with Vegesna and other executives.
Broadcom first approached Emulex for a possible acquisition in December 2008, through a phone call between McGregor and Folino. In January, Emulex restated its corporate bylaws to require 66.67 percent shareholder approval for any amendments. It also adopted a new "poison pill" provision designed to make hostile takeovers more expensive to accomplish. These bylaw changes would later become the subject of litigation between the two companies.
A formal offer for Emulex was sent in writing in April. Emulex's board rejected the offer in May. Broadcom then decided to take the offer directly to shareholders.