Robbins Arroyo LLP: Acquisition of Emulex Corporation (ELX) by Avago Technologies Limited (AVGO) May Not Be in Shareholders’ Best Interests
Robbins Arroyo LLP is investigating the proposed acquisition of Emulex Corporation (NYSE: ELX) by Avago Technologies Limited (NASDAQ: AVGO). On February 25, 2015, the two companies announced the signing of a definitive merger agreement pursuant to which Avago Technologies will acquire Emulex. Under the terms of the agreement, Emulex shareholders will receive $8.00 for each share of Emulex common stock.
Is the Proposed Acquisition Best for Emulex and Its Shareholders?
Robbins Arroyo LLP’s investigation focuses on whether the board of directors at Emulex is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $8.00 merger consideration represents a premium of only 16.1% based on Emulex’s closing price on January 26, 2015. This premium is significantly below the average one-month premium of nearly 43% for comparable transactions within the past five years. In the last three years, Emulex traded as high as $11.19 on February 28, 2012.
On January 29, 2015, Emulex reported strong second quarter 2015 earnings. Specifically, Emulex reported total revenues of $111 million, above the high end of the initial guidance range. In addition, the company reported GAAP earnings of $0.06 as compared to a prior year loss of $0.05, and GAAP operating income of $8 million as compared to an operating loss of $2 million in the prior year and operating income of $1 million in the prior quarter. Further, Emulex beat analyst consensus estimates for both sales and adjusted EPS in three out of its last four quarters.
In commenting on these results, Emulex President and Chief Executive Officer, Jeff Benck, remarked, “The second quarter demonstrated continued progress with initiatives put in place at Emulex over the last 18 months, including the delivery of the broadest set of new Ethernet and Fibre Channel products in the Company’s history, increased focus on execution, and a greater emphasis on fiscal discipline. Coupled with healthy demand for our Fibre Channel portfolio and share gains aided by accelerating adoption of our latest Gen 5 Fibre Channel products, we again exceeded the high end of our initial revenue and earnings guidance.”
In light of these facts, Robbins Arroyo LLP is examining Emulex board of directors’ decision to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
Emulex shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
Emulex shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.