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Chipmaker Broadcom Corp. (NASDAQ:BRCM) late Monday increased its unsolicited offer for Emulex Corp. (NYSE:ELX) by $148 million, to $912 million, in an attempt to woo its unwilling target to the negotiating table.
The new, $11 per share offer is significantly sweeter than Broadcom's original $9.25 per share offer, which was announced in April. Besides the increase in offer price, Broadcom also said it would drop its efforts to gain Emulex shareholders' consent to call a special meeting and would end a lawsuit challenging the target's poison pill provision and super majority voting bylaw. In a letter to Emulex executive chairman Paul Folino, Broadcom president and CEO Scott McGregor struck a decidedly more friendly tone than in past exchanges connected to the potential transaction. "Since last December, we have sought to engage Emulex constructively and professionally," McGregor wrote. "We hope this new approach will lead to a mutually beneficial dialogue and, ultimately, to a friendly transaction. "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 wrote. That said, McGregor also argued that Emulex is unlikely to increase shareholder value on its own in the same way it would by accepting Broadcom's offer. He wrote: "We hope you and your board will balance your optimistic view of your prospects to be the dominant player in the CNA [converged network adapter] market by FY2012 with a realistic assessment of the risks associated with achieving your projections, the intense competition you will face in the market, and the headwinds you will encounter from a core market that is in long term decline." The new offer represents a premium of 66% to Emulex's closing stock price on April 20, the day before Broadcom made its initial offer, the company said. Broadcom said it would extend its tender offer until July 14 and would let it expire at that point should the Emulex board not support it. Emulex responded to the latest offer by saying it would review it with its financial and legal advisers and make a recommendation to shareholders "in due course." - Olaf de Senerpont Domis
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