Emulex files suit seeking to block Broadcom takeover
In its latest attempt to fend off a $764-million hostile takeover bid from Irvine chip maker Broadcom Corp., Emulex Corp. has asked a court to block the deal until Broadcom comes clean about messy criminal charges pending against its former chief executive, Henry Nicholas III.
The lawsuit, which was filed Friday in Orange County Superior Court in Santa Ana, said Emulex shareholders should be suspicious of Broadcom’s overtures because of the scandals surrounding the firm in recent years.
The suit asks for an injunction to stop Broadcom from proceeding until it discloses more information about drug-related and stock-option-backdating accusations involving Nicholas.
“The breadth and depth of Broadcom’s pattern of civil and criminal violations requires that all Broadcom’s statements be viewed with distrust,” the suit says.
Broadcom fired back with a statement saying the suit dredged up “historical claims” that no longer represent the company’s state.
“We are disappointed Emulex would confuse the issue of a highly attractive, all cash offer with items such as these,” the statement said. “We think that Emulex shareholders deserve better than mud slinging and scorched-earth tactics designed to block shareholders from their ability to accept our offer.”
The suit is just the latest salvo in the battle between the two Orange County technology companies.
Costa Mesa-based Emulex, which connects storage, servers and networks in data centers and boasts expertise in Fibre Channel network technology, has said Broadcom’s all-cash buyout offer of $9.25 a share is “unsolicited [and] grossly inadequate.”
Emulex shares have been trading above that level since the bid became public in April, though on Monday they fell 52 cents, closing at $10.47. Broadcom shares jumped $1.05 to $26.53.
Broadcom makes semiconductors for cellphones and other communications products and has nearly 7,200 employees. The much smaller Emulex has about 775.
Broadcom co-founder Nicholas has pleaded not guilty to several charges, including one alleging that he slipped drugs into business associates’ drinks and another accusing him of paying off a former employee to keep stock-option backdating at the company under the radar.
The Emulex suit says he remains active in Broadcom affairs, even screening and approving current chief executive Scott McGregor.
Broadcom’s other co-founder, Henry Samueli, was sued by the Securities and Exchange Commission and agreed to plead guilty to misleading authorities during the backdating investigation. But a judge rejected the deal in September. Samueli was Broadcom’s chairman and chief technology officer.
Broadcom circumvented Emulex’s board on May 5 and presented its takeover proposal directly to shareholders.
On May 15, Emulex’s board turned down Broadcom. Emulex Chief Executive Jim McCluney urged shareholders in a letter last week to ignore the Broadcom offer.
Both sides say a Broadcom advisor approached Emulex last week, but Emulex said no new information was offered. Broadcom said it was rebuffed.
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