Broadcom (NASDAQ: BRCM) is raising its hostile takeover offer for Emulex (NYSE: ELX) but setting a deadline for a deal to occur.
Broadcom upped its offer for the HBA and CNA vendor from $9.25 a share to $11 but said the offer will expire at midnight on July 14 "if the Emulex Board has not at that time indicated its support for the transaction that we have proposed," Broadcom CEO Scott McGregor wrote in a letter to Emulex.
"This is the best offer Broadcom intends to make and reflects Broadcom's assessment of the publicly available information on Emulex and the value Broadcom anticipates for itself from an expedited transaction," McGregor wrote, noting that the offer is a 66 percent premium to Emulex's share price before the initial Broadcom bid on April 21.
Emulex also dropped efforts to change Emulex's bylaws. "We hope this new approach will lead to a mutually beneficial dialogue and, ultimately, to a friendly transaction," said McGregor.
The $912 million offer is more than double Emulex's trailing 12-month sales of $412 million, but the company also has $303 million in cash and no debt. Emulex's business has been hit hard by the downturn, with a 39 percent year-over-year sales decline in its March quarter.
Emulex responded to the new offer with a message to shareholders that they should take no action until Emulex's board reviews the offer and makes a recommendation.
Stifel Nicolaus Aaron Rakers wrote in a research note this morning that the new offer "likely results in open dialogue between the companies and, depending on the perceived opportunities looking forward, could still result in a modestly higher consideration."
R.W. Baird analyst Jayson Noland noted that Broadcom said it will pursue "other value-creating opportunities" if the deal doesn't go through, "which we believe most likely suggests internal development, but could also fuel speculation about a potential bid for" QLogic (NASDAQ: QLGC), Emulex's biggest competitor.
Broadcom cited "the convergence of Ethernet and Fibre Channel" as a reason for the merger. Falling 10GbE prices and the new standard for Fibre Channel over Ethernet (FCoE) could soon make converged data center networks a reality.
Cisco (NASDAQ: CSCO) and Brocade (NASDAQ: BRCD) have been at the forefront of vendors positioning for data storage and Ethernet network convergence.
Emulex shares fell 88 cents to $10 this morning, reflecting some uncertainty over whether a deal will get done.
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