Emulex Reports Acceptances of 88% of Endace Shares

Emulex Corporation announced that acceptances have been received for 88% of the shares in Endace Limited.

Emulex has declared the offer unconditional as to the level of acceptances, and has made an extension of the offer period by 14 days, to 1 p.m. London time on February 26, 2013 for the remaining shareholders to submit their shares to accept the offer. Emulex will not further extend the offer period without declaring the Offer wholly unconditional.

"With this announcement, we have taken one more significant step toward the completion of the acquisition of Endace, and we look forward to welcoming the Endace team and obtaining complete ownership of Endace," said Jim McCluney , CEO of Emulex. "The acquisition of Endace doubles our total addressable market and places Emulex in another high-margin, high-growth market, enhancing our ability to deliver industry-leading solutions to connect, monitor and manage high-performance networks."

Mike Riley , CEO of Endace, said: "We look forward to joining the Emulex team and moving forward with the next step in our strategy to become the market leader in network visibility solutions. The combined capabilities and technical depth of Emulex and Endace will enable us to deliver true end-to-end network management, expand our global reach and better support our customers."

By declaring the offer unconditional as to the level of acceptances, Emulex has waived the minimum acceptance condition, which had been stated in the Offer to be holding or controlling 90% or more of the voting rights in Endace.

Emulex has made no commitment to purchase outstanding shares of Endace after February 26, 2013, unless Emulex reaches ownership of 90% of the Endace shares, in which case the New Zealand Takeovers Code (NZTC) includes a requirement for Emulex to provide an acquisition notice stating either (a) that remaining Endace shares must be sold to Emulex; or (b) that remaining Endace shareholders may sell their remaining Endace shares to Emulex.

The 88.4% of shares received by February 12, 2013 will be paid, should the Offer be completed, at the offer price of GBP 5.00 per share, for a total of GBP 67,306,715, which is equal to USD 106,084,726 at the current exchange rate of GBP 0.634 per US$. All of the Endace employee stock options will be purchased, should the offer be completed, for GBP 4,542,429, which is equal to US$ 7,159,498 at the current exchange rate. If the remaining 11.6% of the Endace shares are submitted by the February 26, 2013 offer period end date, then an additional payment of GBP 8,793,625 will be made should the Offer be completed, which is equal to US$ 13,859,974 at the current exchange rate.

The offer was made pursuant to the NZTC, since Endace is a New Zealand company. The applicable NZTC rule allows, since Emulex declared the Offer unconditional as to the level of acceptances, that Emulex provide a further extension notice before the end of the offer period which had been set for 1 p.m. London time on February 12, 2013. The offer period has been varied to be until 1 p.m. London time on February 26, 2013. The applicable NZTC rule provides that the Offer must remain open for at least 14 days after a variation notice has been sent, and the Offer will not be extended beyond this date.

The Grant Samuel report concludes that if the listing of Endace shares on the AIM is cancelled then "this will make trading of the remaining Endace shares very difficult … [t]he closer the Emulex shareholding gets to 90% the lower the liquidity of Endace shares will be".

The Grant Samuel report states that "Emulex cannot acquire any further shares in Endace for a period of twelve months [after the offer period expires] without making another formal takeover offer for all or some of the remaining shares in [Endace], or without shareholder approval. However, from twelve months after the Emulex offer closes, Emulex will be able to utilise the ‘creep’ provisions of the Takeovers Code to purchase up to a further 5% of Endace per annum."

However, Emulex has made no commitment to purchase any additional Endace shares after February 26, 2013.