kalafoto - Fotolia

Broadcom to acquire Brocade for $5.9bn

Wireless chipmaker Broadcom snaps up Brocade in a $5.9bn deal, and says that it aims to divest the IP Networking business

Broadcom has announced that it is to acquire data and storage networking specialist Brocade for approximately $5.9bn.

Broadcom said that it plans to divest Brocade’s IP Networking business, consisting of wireless and campus networking, data centre switching and routing, and software networking solutions.

The $12.75 per share cash offer represents a premium of 47% to Brocade's close on Friday.

Broadcom is best known for its connectivity chips found in a vast array of hardware, from iPhones to routers. The acquisition will allow it to expand its fibre channel and data storage businesses.

“This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers,” stated Hock Tan, president and CEO 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.”

Broadcom anticipates that Brocade’s fibre channel SAN business will contribute $900m of pro forma non-GAAP EBITDA by its fiscal year 2018. Brocade’s share price was up nearly 9% in pre-market this morning and has jumped nearly 30% since rumours of a takeover began appearing on Monday.

"This transaction represents significant value for our shareholders, who will receive a 47% premium from the Brocade closing share price on Friday, October 28, 2016, and creates new opportunities for our customers and partners,” said Lloyd Carney, CEO of Brocade. “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 centre to the network edge,” he added

A significant portion of the IP Networking business to be divested comes Brocade's $1.5bn acquisition of Ruckus Wireless, made earlier this year.

There was no mention in any of the statements, as to what impact the acqusition would have on Brocade's partner-base. 

The transaction is expected to close in the second half of Broadcom’s fiscal year 2017 which commenced on October 31, subject to all the usual regulatory approvals.

MicroScope+

Content

Find more MicroScope+ content and other member only offers, here.

Read more on Finance and Credit

Start the conversation

Send me notifications when other members comment.

By submitting you agree to receive email from TechTarget and its partners. If you reside outside of the United States, you consent to having your personal data transferred to and processed in the United States. Privacy

Please create a username to comment.

-ADS BY GOOGLE

ComputerWeekly.com

SearchITChannel

Close