The whole of Brocade’s IP Networking business is being sold off as Broadcom concentrates on supporting its OEM business
Chip maker Broadcom is acquiring fibre channel and storage area networking firm Brocade for $5.5 billion in cash, plus taking on $400 million in net debt.
Broadcom plans to sell Brocade’s IP Networking business, consisting of wireless and campus networking, data centre switching and routing, and software networking solutions. This includes offloading Ruckus Wireless, which Brocade only recently acquired.
Brocade acquired Ruckus Wireless this spring for around $1.2 billion in cash and shares to complement its enterprise networking portfolio. It borrowed to finance the deal.
“This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers,” said 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 percent premium from the Brocade closing share price on Friday 28 October, 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 centre to the network edge.”
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 board of directors of Brocade have unanimously approved the transaction, which is expected to close in the second half of Broadcom’s fiscal year 2017, which commenced on 31 October 2016, subject to regulatory approval and the approval of Brocade’s shareholders.
The closing of the transaction is not subject to the sale of Brocade’s IP Networking business.