Broadcom buying Brocade Communications in $5.5B deal

Broadcom buying Brocade Communications in $5.5B deal

Semiconductor vendor Broadcom is acquiring storage vendor Brocade but plans to divest its networking arm after the $5.9bn (€5.32bn) deal closes.

But in a Brocade email of frequently asked questions (FAQ) on the deal when asked what is the impact on Brocade's IP (networking) specific partners, the company said: "For the IP Networking business, these questions will be better answered once a buyer is identified".

Lloyd Carney, CEO of Brocade, said: "Our FC SAN solutions will help Broadcom create one of the industry's broadest portfolios for enterprise storage".

Brocade shares had gained almost 30 percent since the takeover report appeared on Monday.

"The deal is highly complementary to Broadcom's existing enterprise storage offerings and boosts its exposure to the high-growth data center market", CFRA Research Angelo Zino said.

Brocade shares were up 7.2 percent at $12.05 in premarket trading on Wednesday.

The acquisition is expected to close in the second half of Broadcom's fiscal year ending October 2017, pending approval of Brocade's stockholders and regulators.

Broadcom intends to fund the all-cash transaction partly with new debt financing, and the partly with cash on hand.

Broadcom has agreed to purchase Brocade in a deal worth $5.5 billion which brings together Broadcom's chips and Brocade's networking technologies. For example, Broadcom was just acquired by Avago Technologies in February for $37 billion, one of the largest technology acquisitions in history, to drive scale and better serve customers' mobile connectivity needs.

Adding Brocade's fiber channel switching business is "strategic and complimentary for Broadcom", Tan said on a conference call.

Meanwhile, by combining its existing operations with Brocade's networking capabilities, Broadcom will be able to significantly boost its presence and capabilities in fibre channel Storage Area Network.

The deal values San Jose-based Brocade at $12.75 a share, a premium of nearly 47 percent above where Brocade's shares closed last Friday.

Broadcom thinks Brocade's FC SAN business will contribute approximately $900m of pro forma non-GAAP EBITDA (earnings before income tax, depreciation and amortisation) in its fiscal year 2018.

The company's products are used in data centre networking, telecoms, broadband access, smartphones, mobile base stations, power generation and alternative energy systems.

The latest reports tell us that Broadcom Ltd has announced to buy the leading network gear maker Brocade Communication Systems. The networking specialist had jumped 22% on Monday when news of a pending deal was first reported, and popped again today as it was completed.

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