Broadcom confirms Brocade acquisition

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Broadcom confirms Brocade acquisition

Networking vendor Brocade Communications Systems has confirmed it is being acquire by semiconductor maker Broadcom for US$5.9 billion.

Broadcom said it would retain Brocade's fibre channel SAN switching business and divest Brocade's IP networking business – including the recently acquired Ruckus Wireless.

"This strategic acquisition enhances Broadcom's position as one of the leading providers of enterprise storage connectivity solutions to OEM customers," said Hock Tan, president and chief executive of Broadcom, in a statement.

"With deep expertise in mission-critical storage networking, Brocade increases our ability to address the evolving needs of our OEM customers. In addition, we are confident that we will find a great home for Brocade’s valuable IP networking business that will best position that business for its next phase of growth."

Reports that Brocade was about to be acquired have been circulating for several days. Monday Bloomberg reported that Broadcom was one of the interested parties and a deal could be announced as early as this week.

Broadcom is paying US$12.75 per share of Brocade stock in an all-cash transaction for a total of US$5.5 billion, plus US$400 million of net debt. Brocade's board of directors has approved the deal and Broadcom expects to complete the acquisition in the second half of its fiscal 2017, which began 31October 2016. The deal is subject to approval by Brocade's shareholders, as well as regulatory approvals.

Broadcom said the acquisition is not conditioned on the divestiture of Brocade's IP networking business.

"This transaction represents significant value for our shareholders, who will receive a 47 percent premium from the Brocade closing share price on Friday, 28 October 2016, and creates new opportunities for our customers and partners," said Lloyd Carney, chief executive of Brocade, in a statement.

"Our best-in-class FC SAN solutions will help Broadcom create one of the industry’s broadest portfolios for enterprise storage. We will work with Broadcom as it seeks to find a buyer for our IP networking business, which includes a full portfolio of open, hardware and software-based solutions spanning the core of the data center to the network edge."

The deal breaks up Brocade, which just completed its US$1.2 billion acquisition of wireless vendor Ruckus Wireless in May. Brocade reported US$2.26 billion in revenue in fiscal 2015. It just closed its fiscal 2016 on Monday and has not yet reported results for its fourth quarter and full fiscal 2016.

Broadcom, co-headquartered in California and Singapore, said it anticipates that Brocade's fibre channel SAN business would contribute approximately US$900 million of pro forma non-GAAP EBITDA earnings in its fiscal 2018.

This article originally appeared at crn.com

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