2nd UPDATE: Emulex Denies Broadcom Confidential Information
June 09 2009 - 5:42PM
Dow Jones News
Emulex Corp. (ELX), now facing the prospect of a shareholder
meeting and with it a potential challenge to its current board of
directors, denied early this week Broadcom Corp.'s (BRCM) request
for non-public information that Broadcom said could influence the
terms of its acquisition offer.
The exchange, made public in a Securities and Exchange
Commission filing by Broadcom on Tuesday, comes as the two
companies are locked in an increasingly bitter takeover battle.
Emulex has insisted that Broadcom's acquisition offer of $764
million, or $9.25 a share, undervalues the company, based in part
on future business that Emulex cannot yet disclose.
In an email sent Monday, Emulex Chief Executive Jim McCluney
responded to a phone conversation between him and Broadcom Chief
Executive Scott McGregor. According to McCluney, McGregor asked for
"highly competitive and sensitive information regarding our
technology," as well as details of customer plans, design wins and
financial information.
"We fail to see how it would be in the best interests of Emulex
stockholders to share such information with Broadcom," McCluney
wrote.
McGregor responded: "If Emulex can justify a valuation that is
not ascertainable from public information, we would consider
it."
Broadcom's filing also initiated a solicitation from it asking
Emulex shareholders to consent to the holding of a shareholder
meeting, where Broadcom plans to nominate an alternative slate of
directors.
McGregor said he thinks shareholders will back the move to hold
a meeting, though the official solicitation began only this morning
and so there are not yet any figures.
The Broadcom chief told Dow Jones Newswires that they expect to
be able to move forward "by the end of the month or so."
Emulex responded to Broadcom's filing by recommending
shareholders not tender their shares or participate in the consent
solicitation in a statement released Tuesday.
Emulex also said it will hold its annual shareholder meeting
Nov. 19.
The solicitation is one of several avenues Broadcom is now
pursuing in its hostile takeover effort of Emulex, which makes
networking products used in company data centers.
In addition to a lawsuit filed in Delaware court seeking the
dissolution of Emulex's poison pill provision, Broadcom also
initiated a tender offer for Emulex shares.
After receiving about 2.3 million Emulex shares out of 82.9
million shares outstanding by the initial deadline of June 3,
Broadcom extended the offer until June 17.
Emulex, though, remains entrenched, filing a lawsuit to block
Broadcom's actions and insisting that Broadcom's offer undervalues
the company, is opportunistic given the difficult business
conditions amid the recession, and doesn't factor in the future
business potential of certain product design wins of which Broadcom
alledgedly is aware.
Emulex said that "the Board is focused on delivering value and
will continue to take actions it believes are in the best interests
of stock holders."
And with Emulex shares consistently trading well above the
$9.25-a-share offer price since the offer was announced in April,
it's unlikely many shareholders will be willing to tender. Emulex
shares closed Tuesday down 0.2% at $10.58.
For his part, McGregor said that providing shareholders with the
opportunity to address management during a shareholder meeting is
the next vital step.
"The most important part at this point is the consent," he
said.
Broadcom shares closed Tuesday up 5.5% at $27.25.
-By Jerry A. DiColo, Dow Jones Newswires; 201-938-5670;
jerry.dicolo@dowjones.com