Emulex Rejects Acquisition Offer From Firm Owning 6.9% of Shares
Emulex Corp., a Costa Mesa computer products manufacturer, has rejected an unsolicited acquisition offer valued at $120 million.
“Emulex Corp. is not for sale and the sale of the company is not currently under consideration by the board of directors,” Fred B. Cox, Emulex chairman, president and chief executive, said in a prepared statement Tuesday. “We received a proposal from TA Associates which was rejected. As far as we are concerned, the matter is closed.”
On Nov. 3, TA Associates, a Boston venture capital firm, made a proposal to the Emulex board of directors to purchase all of the corporation’s common stock for $11.50 per share, according to Securities and Exchange Commission documents filed Monday by TA Associates.
The cash offer was scheduled to lapse 7 days later, and on Nov. 10 Emulex director Robert H. Goon wrote to TA on behalf of his company saying that the corporation was not for sale, the SEC documents say.
But on Nov. 11, TA wrote back to Goon “extending its offer until further notice in order to afford the directors of the corporation further time and opportunity to explore the proposal,” the documents say.
“Our offer stands,” P. Andrews McLane, a general partner in TA, said in an interview Tuesday. TA has held Emulex stock “for a long time,” McLane said, and feels that the shares are undervalued.
“We share the frustration that the company probably feels that it, and other technology companies in general, doesn’t have the market and investor interest it feels it deserves,” he said.
If TA is indeed successful in acquiring all of Emulex’s outstanding shares, the venture capital firm will consider taking Emulex private, McLane said. “We wonder if the current shareholders might not be better served in having it go private,” he said.
Emulex officials could not be reached for comment Tuesday.
To date, TA owns 779,432 shares of Emulex’s outstanding common stock, or 6.91% of the 11,285,571 shares outstanding as of the quarter ending Oct. 2. TA said that the purchase of Emulex stock was for investment purposes.
TA most recently bought Emulex stock, on behalf of itself and its investors, on Nov. 11 and 16--after Goon wrote to TA saying the company was not for sale.
“These entities and persons (TA and its investors) intend to continue reviewing and evaluating the corporation in relation to their investment objectives,” the SEC documents say.
After 3 years of lackluster financial results, Emulex returned to profitability in fiscal 1988, reporting in August that its earnings soared 162% on a 20% increase in revenue. The good news came just 7 months after a management shake-up.
“Emulex today is a leaner, more efficient and better-focused organization than a year ago,” Cox said in August, “with higher gross profit margins and reduced operating expense levels.”
The company reported earnings of $9.1 million for the year ended July 3, contrasted with earnings of $3.5 million a year earlier. Sales climbed to $125.1 million, from $103 million. From 1985 to 1987, Emulex’s sales remained stagnant at between $103 million and $104 million.
Emulex stock rose 25 cents in over-the-counter trading Tuesday, to close at $10.125.
