Broadcom confirms takeover of Brocade for USD 5.9 bln

News Broadband Global 2 NOV 2016
Broadcom confirms takeover of Brocade for USD 5.9 bln
Broadcom has confirmed an agreement to acquire Brocade for USD 5.9 billion, expanding its position in the Fiber Channel SAN market. The company is offering USD 12.75 per share cash for Brocade and will also assume USD 0.4 billion in debt. The bid is a 47 percent premium on Brocade's share price of 28 October, the day before reports first emerged of a possible deal. 

The takeover is focused on acquiring Brocade's Fiber Channel business, as Broadcom plans to sell Brocade’s IP Networking business, consisting of wireless and campus networking, data center switching and routing, and software networking solutions. Broadcom said the deal will strengthen further its position in enterprise storage connectivity products for OEM customers, after already acquiring Avago Technologies early this year. 

In addition, the takeover will add to Broadcom’s adjusted free cash flow and earnings per share immediately at closing. Broadcom expects Brocade’s FC SAN business will contribute USD 900 million of annual EBITDA in its fiscal year 2018. 

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. Completion of the deal is not subject to any financing conditions, nor the sale of Brocade’s IP Networking business. Broadcom said it will use cash on hand and new debt financing for the acquistion. 

Along with the announcement, Broadcom confirmed its outlook for its fiscal fourth quarter to October and narrowed the revenue guidance to USD 4.090-4.165 billion, at the high end of the prior range of USD 4.015-4.165 billion. 

Categories:

Fixed,  IT

Companies:

Broadcom,  Avago Technologies,  Brocade

Regions:

Global

Tags:

Enterprise equipment, Semiconductors, Network equipment, Wholesale, M&A buyouts & divestments

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