Broadcom turns hostile after Emulex rebuffs bid

By Sinead Carew

NEW YORK (Reuters) - Broadcom Corp's (BRCM.O) $764 million bid for Emulex Corp (ELX.N) turned hostile on Tuesday as the chipmaker took its offer directly to Emulex shareholders at the same price that the company had rejected.

Shares of Emulex, which supplies storage technology, rose 2 cents to close at $10.77, staying above Broadcom's $9.25-a-share offer in expectations of a higher bid from Broadcom or another company. Broadcom shares closed up 1 percent, or 26 cents, at $24.20.

"While we much prefer to arrive at a negotiated agreement with Emulex, the Emulex board has left us with no choice but to ask Emulex stockholders to call for a special meeting of stockholders so that they can consider the merits of our offer for themselves," Broadcom Chief Executive Scott McGregor said in a statement.

Emulex issued its response after the market closed on Tuesday, advising shareholders to take no action.

The company added it will review Broadcom's consent solicitation and make its recommendations in due course.

Some analysts said they did not expect shareholders of Emulex, which makes components used to connect computers to remote storage equipment, to accept Broadcom's price, whether or not another bidder comes in.

"I think we'll probably see something more in the neighborhood of $11 to $12," said Pacific Crest analyst Ruben Roy, who estimated that the deal would still boost Broadcom's profit at a price tag of close to $14 a share.

But others were skeptical that Broadcom would raise its offer. Jefferies & Co analyst Adam Benjamin said on Tuesday it could be using the public bid as a way to distract Emulex enough to raise concerns among its customers.