Emulex sued for rejecting Broadcom's takeover offer

By Supantha Mukherjee

BANGALORE (Reuters) - At least two lawsuits have been filed by shareholders against Emulex Corp (ELX.N), challenging the storage networking company's rejection of a takeover bid by Broadcom Corp (BRCM.O).

On May 5, Broadcom's $764 million bid for Emulex turned hostile as the chipmaker took its offer directly to Emulex shareholders at the same price that the company had rejected.

Both the lawsuits, which were filed in a Delaware court, challenged amendments to Emulex's corporate bylaws.

In January, Emulex adopted a so-called poison pill, amending its bylaws and adopting a new stockholder rights agreement to deter a possible takeover. The move came a month after Broadcom privately approached Emulex to discuss an acquisition.

On May 4, Orange County Business Journal quoted Emulex Chief Executive Jim McCluney saying that the Broadcom bid came out of the blue and while Broadcom CEO Scott McGregor expressed a general interest in the combination, there were no terms presented at all.

Emulex declined to comment on the lawsuits.

These lawsuits are filed whenever shareholders think that the management of the company is trying to protect itself by enacting these poison pill bylaws to prevent takeovers, said Stephen Susman, a commercial litigator with law firm Susman Godfrey.

The plaintiffs claimed that the amendments "fundamentally altered" the governance structure of Emulex, making it difficult for a potential suitor from acquiring Emulex even if the majority of the shareholders want such a transaction to proceed.