Emulex Corp. (NYSE: ELX), a provider of data center networking products, has issued a Takeover Notice, under the terms of the New Zealand Takeovers Code, pursuant to which Emulex will make an offer to acquire all of the outstanding equity interests in Endace Ltd. (LSE: EDA), in an all cash transaction.
Endace is a network performance management company that provides network monitoring appliances, network analytics software, and ultra-high speed network access switching with what it asserts is 100% accuracy (see, for example, “Endace offers 100 Gigabit Ethernet network monitoring system”).
Emulex intends to make a cash offer for 500 pence per share. Using the current exchange rate of $1.61 to the pound Sterling, this represents a transaction value of approximately $130 million. Grant Samuel in Auckland has been commissioned to provide an independent adviser's report, as required by the New Zealand Takeovers Code. The independent directors unanimously support the offer and, subject to the offer price being within or above the valuation range of Grant Samuel's report, recommend that Endace shareholders accept the offer.
Emulex has entered into lock-up agreements with certain directors of Endace, including the chairman and co-founder, Dr. Ian Graham. Emulex has also received commitment letters from two other directors who are shareholders, as well as receiving expressions of support from another founder of the business, Selwyn Pellett. In addition, preliminary conversations with certain institutional shareholders of Endace have indicated general support for the proposed transaction.
"This acquisition provides Emulex with a strategic entry point into the network performance management space at a disruptive point in time, as speeds move to 10 Gbps, making network visibility from end-to-end a critical requirement in a converged network environment," said Jim McCluney, chief executive officer, Emulex. "Acquiring Endace aligns with our software-defined convergence strategy, doubles our total addressable market and places Emulex in another high-margin, high-growth market.”
The combined expertise from the two companies will result in new and innovative ways to solve the challenges of network complexity and ensure application-level performance at speeds of 10 Gbps and beyond, according to Emulex. Endace's ability to record, visualize, and monitor network traffic provides customers with the ability to dynamically optimize application delivery across the infrastructure. By combining Emulex's network convergence adapters and Endace's network visibility capabilities, Emulex believes it will be the only company that can provide true end-to-end application visibility, optimization and acceleration.
"The Endace team is excited to be joining forces with Emulex. Our companies share a common vision and have a strong cultural affinity. Together, we will create a new generation of network visibility solutions and take them to a global market," said Mike Riley, CEO, Endace. "The combined strengths of Emulex and Endace will provide our customers with industry-leading solutions to connect, monitor, and manage high-performance networks in the world's most demanding data center environments."
Excluding transaction related expenses, Emulex expects the acquisition to be neutral to its non-GAAP earnings per share for fiscal 2013 and accretive at the beginning of fiscal 2014.
The transaction is expected to be completed in the March quarter, subject to certain closing conditions, including the acceptance of the offer by the holders of 90% of the outstanding shares of Endace.
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