Emulex takes legal action to stop Broadcom buyout; Borland Software receives counter bid

By Cristal Cody

Tupelo, Miss., June 1 - Emulex Corp. went on the defensive in a bid to stop Broadcom Corp.'s hostile takeover of the storage technology company for $764 million, or $9.25 a share.

In other situations, Borland Software Corp. is juggling another suitor.

Meanwhile, General Motors Corp. made its bankruptcy filing official on Monday, and investors rallied on better economic data and sent indexes up more than 2.00%.

The Dow Jones Industrial Average rose 221.11 points, or 2.60%, to 8,721.44.

The Standard & Poor's 500 index gained 23.73 points, or 2.58%, to close at 942.87 points, and the Nasdaq Composite index gained 54.35 points, or 3.06%, to end at 1,828.68.

Emulex takes action

Emulex said in a lawsuit filed Friday in the Orange County Superior Court of California that alleged criminal actions by Broadcom executives in the past place doubt on the company's statements.

Broadcom co-founder Henry Nicholas III has been indicted and is awaiting trial on drug-related and stock options backdating charges.

The company's other founder, Henry Samueli, pleaded guilty last year to making a false statement to the Securities and Exchange Commission.

David Wu, an analyst with Global Crown Capital, LLC told Prospect News on Monday that Emulex's lawsuit should have no effect on Broadcom's stock.

The takeover "would add to earnings, but it's not that critical if they don't do the deal," he said. "They're not dependent on this getting done."

Costa Mesa, Calif.-based Emulex has urged shareholders to reject the offer.

Irvine, Calif.-based semiconductor maker Broadcom launched the tender offer on May 5. It is scheduled to expire on Wednesday.

Shares of Emulex lost 52 cents, or 4.73%, to close at $10.47 on Monday, while Broadcom's stock added $1.05, or 4.12%, to close at $26.53.

Borland mulls bid

Austin, Texas-based Borland Software agreed on May 6 to be acquired by Newbury, England-based software company Micro Focus International plc for about $76.85 million in cash.

The $1.00-a-share offer then represented a 25.00% premium over the stock's closing price of 80 cents a share.

Borland said in its proxy statement filed on Monday with the SEC that it received an offer of $1.20 a share from "company E" on May 22.

"Our board discussed company E's experience with acquisitions," Borland said in the filing. "Based on the discussion, our board determined that the indication of interest was reasonably likely to lead to a superior proposal. On May 28, we entered into a nondisclosure agreement with company E, and granted access to the data room."

Borland spokesman Leah Bibbo told Prospect News that the company had no additional comment beyond the proxy statement.

The company's sale to Micro Focus has been in the works for more than a year, according to the filing.

On Feb. 8, 2008, Micro Focus' board authorized management to pursue a possible transaction.

Later that month, on Feb. 17, 2008, executives of Borland and Micro Focus met to discuss synergies, and strategy was discussed at a March 5, 2008, meeting in Madrid.

A year later, on March 11, Borland received proposals from three companies, including Micro Focus.

By May 6, the choice was narrowed down to Micro Focus and the two companies announced a deal.

The sale to Micro Focus is expected to be completed by the third quarter.

Borland said in the proxy statement it will ask shareholders to vote on the deal in a special meeting.

Micro Focus shareholders also must approve the acquisition.

Borland said in the filing that the deal should not need U.S. or foreign antitrust clearance.

The agreement includes a $3 million breakup fee payable by Borland and a termination date of Nov. 5, 2009, according to the regulatory filing.

Borland's stock rose 18 cents, or 18.25%, to close at $1.16 on Monday. The stock has traded from 25 cents to $1.95 over the past year.

Micro Focus shares fell 6.70% to 368.75p on the London Stock Exchange.

Mentioned in this article:

Borland Software Corp. Nasdaq: BORL

Broadcom Corp. Nasdaq: BRCM

Emulex Corp. NYSE: ELX

General Motors Corp. NYSE: GM

Micro Focus International plc London: MCRO

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