Avago to buy Emulex for $606 million plus debt

Avago Technologies Ltd. (NASDAQ:AVGO) says it has reached an agreement to purchase Emulex Corp. (NYSE:ELX). Avago will pay $8.00 per share for the Costa Mesa, CA, based network connectivity, monitoring, and management company, a total of approximately $606 million. Net of cash and debt acquired, the total outlay will be around $609 million, Avago predicts.

Avago expects to fund the all-cash transaction with cash available on its balance sheet.

The company plans to combine its existing server storage connectivity and fiber-optic offerings with Emulex's products, and operate the entirety within its enterprise storage segment. Emulex is particularly strong in Fibre Channel offerings and "network visibility" (see "Emulex adds network monitoring with Endace acquisition"). Avago also expects the transaction to prove accretive immediately to its non-GAAP earnings per share.

"Emulex's connectivity business fits very well with Avago's existing portfolio serving the enterprise storage end market," stated Hock Tan, president and CEO of Avago. "We are excited to welcome the Emulex team to Avago."

"This combination represents a great opportunity for Emulex and its employees to build upon our history of delivering leading-edge solutions to our customers, while providing immediate value to our stockholders," said Jeffrey Benck, president and CEO of Emulex. "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 boards of directors of the two companies have approved the proposed deal, and senior manager within Emulex as well as board members who collectively own about 2.5% of the company's shares have executed tender and support agreements to support closing of the deal. Avago did not disclose what roles the Emulex executives may have after the transaction concludes.

That milestone should be reached in the second half of Avago's fiscal year, which ends November 1, 2015. The transaction is subject to customary closing conditions.

The deal also would appear to be the subject of what is becoming the customary investigation by law firms trolling for disgruntled shareholders. Shareholder rights law firm Johnson & Weaver, LLP, announced that it would love to hear from Emulex shareholders who aren't sure $8 per share is enough for the company.

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