Chipmaker Broadcom is writing a $5.9 billion cheque for networking systems supplier Brocade.
Broadcom said that it will be an all-cash transaction for a total of $5.5 billion, plus $400 million of net debt. Brocade’s board of directors has approved the deal and Broadcom expects to complete the acquisition in the second half of its fiscal 2017.
Broadcom said it would retain Brocade’s fibre channel SAN switching business and divest Brocade’s IP networking business – including the recently acquired Ruckus Wireless.
Hock Tan, president and CEO of Broadcom said the deal enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers.
“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 said the deal does not depend on Brocade’s off-loading its IP networking business.
Lloyd Carney, Chief Executive Officer of Brocade, in a statement that the transaction represents significant value for our shareholders and creates new opportunities for our customers and partners.
“Our 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 center to the network edge.”
Brocade, just completed its $1.2 billion acquisition of wireless vendor Ruckus Wireless in May. Brocade reported $2.26 billion in revenue in fiscal 2015. It just closed its fiscal 2016 on Monday and has not yet reported results for its fourth quarter and full fiscal 2016.
Broadcom said Brocade’s fibre channel SAN business would contribute approximately $900 million of pro forma non-GAAP EBITDA earnings in its fiscal 2018.
