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Chip maker to divest Brocade’s IP networking business, including recently-acquired Ruckus Wireless.
Chip maker Broadcom on Wednesday agreed to acquire enterprise networking vendor Brocade for $5.9 billion (€5.3 billion).
Broadcom, which makes semiconductors used in fixed and wireless network infrastructure, data centres, and industrial and power-generation equipment, is buying Brocade for its fibre channel storage area network (FC SAN) switching business.
It plans to divest Brocade’s IP networking division, which includes WiFi hardware maker Ruckus Wireless, which Brocade acquired in April for $1.2 billion.
"This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity," said Broadcom CEO Hock Tan, 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 we will find a great home for Brocade’s valuable IP networking business," he said.
Broadcom has offered Brocade $12.75 per share, which represents a 47% premium on Brocade’s closing share price on 28 October, valuing the company at $5.5 billion of equity plus $400 million of net debt.
"This transaction represents significant value for our shareholders," 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," he added.
Broadcom, which was itself acquired by rival chip maker Avago Technologies last year for $37 billion, will fund the Brocade takeover through a combination of cash on hand and new debt.
The deal is subject to regulatory approvals and customary closing conditions, and is expected to complete in the second half of Broadcom’s fiscal year 2017, which began on 31 October.
