Broadcom Limited and Brocade Communications Systems have entered into a definitive agreement under which Broadcom will acquire Brocade, a leader in Fibre Channel storage area network switching and IP networking, for $12.75 per share in an all-cash transaction valued at approximately $5.5 billion, plus $0.4 billion of net debt.
Broadcom is planning to divest Brocade’s IP Networking business, consisting of wireless and campus networking, data centre switching and routing, and networking software.
“This strategic acquisition enhances Broadcom’s position as a leading providers of enterprise storage connectivity solutions for OEM customers,” said Hock Tan, President and Chief Executive Officer of Broadcom.
“With expertise in storage networking, Brocade has increased 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.”
Lloyd Carney, CEO of Brocade, said, “This transaction represents significant value for our shareholders, who will receive a 47% premium from the Brocade closing share price at the end of October, 2016, and it will create new opportunities for customers and partners. Our best-in-class FC SAN solutions will help Broadcom create one of the industry’s broadest portfolios for enterprise storage.”
Upon closing, the transaction is expected to be immediately accretive to Broadcom’s non-GAAP free cash flow and earnings per share. Broadcom currently anticipates that Brocade’s FC SAN business will contribute approximately $900 million of pro forma non-GAAP EBITDA in its fiscal year 2018.
The boards of Brocade and Broadcom unanimously approved the transaction, which is expected to close in the second half of Broadcom’s fiscal year 2017, subject to regulatory approvals in various jurisdictions, customary closing conditions as well as the approval of Brocade’s stockholders.