Broadcom Limited agreed to acquire Brocade Communications Systems in a $5.9-billion deal, which includes the assumption of $400 million of debt. In an announcement of the deal, Broadcom’s president and chief executive officer Hock Tan said it “enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers … Brocade increases our ability to address the evolving needs of our OEM customers.” Broadcom plans to divest Brocade’s IP networking business, which includes Ruckus Wireless as well as campus networking, data center switching and routing, and software networking businesses. Brocade acquired Ruckus Wireless for $1.2 billion in April. “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,” Tan added when announcing Broadcom’s acquisition of Brocade.
The $5.5-billion price tag equates to $12.75 per share, which is a 47-percent premium over Brocade’s closing price on Friday, October 28. Brocade’s CEO Lloyd Carney said, “Our best-in-class FC SAN [Fibre Channel storage area network] 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.”
Reporting on the deal on Wednesday, November 2, TechCrunch’s Ron Miller (@ron_miller) noted, “The nature of the deal in which they are planning to sell off parts of the business will have to create a level of uncertainty among Brocade’s current customer base … Ruckus Wireless … suddenly finds itself in no-man’s land with no clear understanding of who its owner ultimately will be … Today’s deal is expected to close in October next year, and is of course going to be subject to regulatory approval.”