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Avago to acquire storage networking specialist Emulex

Avago Technologies has agreed to buy Emulex, which makes products for storage networking, in an all-cash transaction valued at $606 million plus debt, bringing the total amount payable to around $609 million (€544 million).

Emulex investors will receive $8 a share in cash, a 26 per cent premium over the share price when the deal was announced.  

“Emulex is very complementary to Avago’s enterprise storage businesses and aligns very well with the Avago business model,” said Hock Tan, president and CEO of Avago. “We expect this transaction to allow us to offer one of the broadest suites of silicon and software storage solutions to the enterprise and data centre markets.”  

He points to the fact that Emulex is considered to be a leading supplier of Fiber Channel and related products selling primarily into the same server and enterprise storage manufacturers that Avago currently serves with its SAS rate and PCI Express switching and fibre-optic products.

“We are very big in enterprise storage as you know, particularly after our integration,” he said on the company’s earnings conference call, referring to the recent multi-billion dollar acquisition of semiconductor company LSI which closed less than a year ago.

He continued: “It’s a very logical and strategic next step for us to add Fiber Channel and Fiber Channel over Ethernet into our suite of component solutions and software.”

Upon closing, the transaction is expected to immediately add to Avago's earnings.

Emulex management are committed to the deal. Senior members of the Emulex management team and all of the directors of Emulex, collectively owning approximately 2.5 per cent of Emulex's outstanding shares, have executed tender and support agreements in support of the transaction.

"This combination represents a great opportunity for Emulex," said Jeffrey Benck, president and CEO of Emulex in a statement. "Our leading portfolio is a strong complement to Avago's offerings and capabilities, accelerating our strategy to support next-generation server and storage architectures."

The transaction, which is expected to close by November 2015, is subject to customary closing conditions.

The deal also appears to be subject to investigations launched by class action law firms on behalf of Emulex shareholders, who question whether the Emulex board obtained the best price possible for the company.

Such legal challenges seem to be increasingly common. However, The Register points out that the deal price is 34 per cent less than shareholders were offered six years ago, when Broadcom tried to take over Emulex with a bid worth up to $912 million.

 

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