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Broadcom to Acquire Brocade for $5.5 Billion in All-Cash Deal

Wednesday, November 2, 2016 5:41
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brocade-logoNetworking giant Brocade Communications Systems, Inc. (NASDAQ:BRCD), days after publicly putting itself up for sale, said it will be acquired by wireless chipmaker Broadcom Ltd (NASDAQ:AVGO) for $5.5 billion in cash.

Broadcom will pay $12.75 per share for BRCD, which is a 13% premium over the stock’s Tuesday closing price of $11.24, and a 46% premium over its mid-Monday trading price of $8.70, just before the company said it was looking for a buyer.

Broadcom expects to fund the transaction with new debt financing and cash available on its balance sheet. After the deal closes, the combined company will divest Brocade’s IP Networking business, consisting of wireless and campus networking, data center switching and routing, and software networking solutions.

Broadcom commented via press release:

“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.”

The companies expect the deal to close toward the middle of 2017.

The world of mergers and acquisitions (M&A) has been on fire recently, with nearly $500 billion worth of deals announced last month alone.

Brocade shares rose nearly 9% on the news, while Broadcom shares were inactive in premarket trading Wednesday.

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