Emulex stock holds above Broadcom bid; Target stands ground; Analyst: Teppco may attract more

By Cristal Cody

Tupelo, Miss., May 5 - Broadcom Corp. went hostile on Tuesday and launched a tender offer for the outstanding shares of Emulex Corp. at $9.25 a share in cash, but shares held up above the bid.

The board of directors of Emulex rejected the $764 million offer on Monday and cited the company's yearly stock price high of $14.74, which one analyst interpreted as a buyout target price.

An analyst told Prospect News that while Emulex cited the stock high, "there's lots of stocks that wish they were at their 52-week high today."

Also on Tuesday, Target Corp. urged employees to vote for its slate of nominees at the upcoming shareholders meeting instead of the nominees from activist shareholder Pershing Square Capital Management, LP, according to a letter filed with the Securities and Exchange Commission.

Pershing's chances of success in the proxy contest are not great, an analyst told Prospect News on Tuesday.

In other deals, Enterprise Products Partners LP could offer a small price bump in its bid for Teppco Partners LP, based on the company's acquisition history, an analyst said Tuesday.

Meanwhile on Wall Street, stocks fell slightly as investors await results this week of the U.S. government's stress tests on banks.

The Dow Jones Industrial Average dipped 16.09 points, or 0.19%, to 8,410.65 on Tuesday.

The Standard & Poor's 500 index lost 3.44 points, or 0.38%, to close at 903.80, and the Nasdaq Composite index dropped 9.44 points, or 0.54%, to finish at 1,754.12.

Broadcom's offer

Emulex advised shareholders in a statement on Tuesday to take no action on Broadcom's tender offer while it reviews the bid.

The board of Costa Mesa, Calif.-based Emulex, which makes data networking storage products, said on Monday that the offer significantly undervalues the company.

"Emulex is not dead-set against selling - they just think they're worth more money," an analyst told Prospect News.

The tender offer from Irvine, Calif.-based Broadcom, which makes semiconductor chips for communications equipment, expires on June 3.

Broadcom said it will fund the deal with existing cash holdings.

On Tuesday, Broadcom also filed a preliminary consent solicitation statement with regulators to allow stockholders to call a special meeting and amend Emulex's bylaws to allow the sale.

"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," Scott A. McGregor, president and chief executive officer of Broadcom, said in a statement.

Broadcom said in the consent statement filed with the SEC on Tuesday that the company also will push to replace the board with its own nominees, who in turn would push through the sale. Broadcom said it has not selected the board nominees yet.

Emulex shares held a wide spread above the offer and closed Tuesday up 2 cents, or 0.19%, at $10.77.

Broadcom's stock added 26 cents, or 1.09%, to close at $24.20.

Target stands ground

Target shareholder Pershing Square Capital Management took issue with the company's plans to hold the May 28 shareholders meeting in an unfinished store in Waukesha, Wis., according to a letter sent to the Minneapolis-based retailer's employees and filed with the SEC.

Pershing Square holds 3.3% of Target's outstanding stock.

William A. Ackman, who manages the Pershing Square hedge fund, cited concerns about access to phone and internet lines in order to include any last-minute proxies in the battle for nominees to the board.

Ackman unsuccessfully lobbied last year for Target to spin off about $20 billion of its real estate holdings into a stand-alone real estate investment trust.

Pershing's plan to spin off the real estate assets is "economic mamby pamby bookkeeping magic," an analyst said in an interview Tuesday.

Target shares gained 71 cents, or 1.75%, to close at $41.26.

Enterprise 'has room'

Enterprise Products, a Houston-based natural gas and oil pipeline transportation firm, offered $1.00 in cash per Teppco unit and 1.043 Enterprise common units for each outstanding Teppco unit.

Teppco Partners, a Houston-based oil and gas pipeline and storage company, rejected the buyout proposal valued at $21.89 a unit. The special committee said in an April 29 statement that it is willing to consider a revised proposal.

Enterprise Products "has room to increase its offer for Teppco," an analyst said Tuesday.

However, the company's "acquisition track record suggests that it may not be willing to increase the price significantly," the analyst said.

Teppco's stock rose 16 cents, or 0.56%, to close at $28.49 on Tuesday. The stock has traded from $16.90 to $36.88 over the past year.

Enterprise Products' shares added 22 cents, or 0.89%, to $24.88.

Mentioned in this article:

Broadcom Corp. Nasdaq: BRCM

Emulex Corp. NYSE: ELX

Enterprise Products Partners LP NYSE: EPD

Target Corp. NYSE: TGT

Teppco Partners LP NYSE: TPP

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