Broadcom Drops Bid for Emulex

The takeover battle for Data Domain (NASDAQ: DDUP) may have been settled in favor of EMC (NYSE: EMC), but another high-profile data storage merger fight appears to be over.

Emulex (NYSE: ELX) announced yesterday that it has once again rejected a takeover offer from Broadcom (NASDAQ: BRCM), and Broadcom followed with a statement that it will “cease all efforts to acquire Emulex.”

Broadcom sweetend its offer for the HBA and CNA maker last week and softened its hostile stance, but Emulex remains unimpressed.

Emulex said its board of directors “unanimously rejected” Broadcom’s offer, saying it “significantly undervalues Emulex’s long-term prospects, is inadequate, and is not in the best interests of Emulex and its

Executive Chairman Paul Folino stated, “We unanimously believe Emulex will deliver significantly more value than Broadcom’s revised offer through the company’s rapidly developing converged networking business and solid execution in our host server and embedded storage markets,” but he added that the board “would of course give full consideration to a bona fide offer from any party that reflects the full value of the company.”

Broadcom had called its latest $11 a share offer “the best offer Broadcom intends to make” based on publicly available information and said it would expire on July 14 if not accepted.

In a statement this morning, Broadcom CEO Scott McGregor said, “Although we were unable to negotiate an expeditious and friendly transaction at a price that makes sense to us given the expectations set by the Emulex board, there are other value-creating alternatives that we will now turn our attention to as we position Broadcom to capitalize on the emerging opportunities in the converged enterprise networking markets.”

Broadcom said it “does not expect that the conditions to close its tender offer will be satisfied by July 14, 2009, and Broadcom does not intend to waive any of these conditions. Assuming that the conditions are not satisfied on or before July 14, 2009, Broadcom will not accept for payment any shares that have been tendered and will return those shares as promptly as practicable after the tender offer expires.”

In a research note this morning, R.W. Baird analyst Jayson Noland lowered his price target on Emulex to $9 “to reflect fair value absent any acquisition premium. … We do not expect BRCM to counter with a higher bid.”

Emulex also raised its financial guidance for the quarter that just ended. The company is expected to report formal earnings in early August.

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