Chipmaker Broadcom to buy
network gear maker Brocade for $5.5 billion
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[November 02, 2016]
(Reuters) -
Chipmaker
Broadcom Ltd said on Wednesday it would buy network gear maker Brocade
Communications Systems Inc for $5.5 billion in cash, to expand its fiber
channel and data storage businesses.
The $12.75 per share offer represents a premium of 46.7 percent to
Brocade's close on Friday.
Bloomberg reported on Monday that Brocade was in talks to sell itself.
Brocade shares were up 7.2 percent at $12.05 in premarket trading on
Wednesday. Broadcom shares were untraded.
Singapore-based Broadcom, formerly called Avago, is known for its
connectivity chips, while California-based Brocade makes networking
hardware, software and storage products.
"This strategic acquisition enhances Broadcom’s position as one of the
leading providers of enterprise storage connectivity solutions to OEM
customers," Broadcom Chief Executive Hock Tan said in a statement.
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Customers use Brocade's fiber channel protocol-based networking products
to build storage area networks within their data centers.
Broadcom said it planned to divest Brocade's IP networking business,
consisting of wireless and campus networking, data center switching and
routing, and software networking solutions.
A big part of Brocade's IP networking business that Broadcom plans to
divest was acquired as part of Brocade's $1.5 billion acquisition of
Ruckus Wireless earlier this year. This unit generated $209 million in
product revenue in the third quarter.
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Broadcom Limited company logo is pictured on an office building in
Rancho Bernardo, California May 12, 2016. REUTERS/Mike Blake
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"We will work with Broadcom as it seeks to find a buyer for our IP
Networking business," Brocade Chief Executive Lloyd Carney said in a
statement.
Reuters reported on Tuesday that a Broadcom-Brocade deal was imminent.
Broadcom said it would take on about $400 million of Brocade's debt and
fund the deal with available cash and debt.
Brocade shares had gained nearly 30 percent since the takeover report
appeared on Monday.
(Reporting by Supantha Mukherjee in Bengaluru; Editing by Sriraj
Kalluvila and Ted Kerr)
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