Emulex Corp to buy back shares, Chairman to step down amid shareholder pressure
Emulex Corp said it would be repurchasing 30% of its stock in the wake of pressure from shareholders. James McCluney, the Executive Chairman of the Board, will also step down from his post as activist shareholders criticized the company's management and financial discipline in the past few months. In a statement, the company said McCluney will not seek a re-election for a board seat. He will step down on February 6. Emulex added that it will be reducing the number of its board members from 12 to 11. It will also be looking for independent directors to replace three current directors. However, the company did not reveal names.
Activist investors like Starboard Value and Elliott Management Corp which hold stakes in Emulex had lobbied for a new strategy and changes to the firm's board composition.
The share buyback, which is estimated to be worth USD 200 million, will start immediately. Emulex said it also intended to reduce its yearly expenses by USD 30 million in two years. The company did not give more details but Emulex said it would cut the expenses by getting rid of lower returns on investment programs as well decrease its products. In a separate statement, Emulex also said it would be offering up to USD 125 million in convertible senior notes.
Based in Costa Mesa, California, Emulex is engaged in the business of selling chips which enable computer servers and storage networks to facilitate data transfer. According to a Bloomberg report, the firm has not reported an annual profit in three years.
In a statement, Elliott Management Fund Manager Jesse Cohn, "The meaningful cost reduction initiatives, the plan to return significant capital to shareholders and the board transformation at Emulex are all positive steps." He added that Elliott had already reviewed the plans Emulex announced before the firm's public announcement.