Fabless semiconuctor company Broadcom Limited is buying American technology company specialising in data storage and networking products, Brocade Communications Systems, the two companies announced in a press release this Wednesday. Broadcom will buy Brocade for a total of $5.9 billion (£4.79bn), with $0.4 being in net debt, and the rest in cash.
The deal is expected to be finalised in the second half of Broadcom's fiscal 2017, which started on October 31 2016. After closing the deal, the transaction is expected to be immediately accretive to Broadcom's non-GAAP cash flow, and earnings per share. The deal is still subject to various regulatory approval, the two companies added. The plan is for Broadcom to divest Brocade's IP Networking business.
“This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers,” stated Hock Tan, President and Chief Executive Officer of Broadcom.
“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.”
“This transaction represents significant value for our shareholders, who will receive a 47 per cent premium from the Brocade closing share price on Friday, October 28, 2016, and creates new opportunities for our customers and partners,” said Lloyd Carney, Chief Executive Officer of Brocade.
“Our best-in-class 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.”