Broadcom Limited (NASDAQ:AVGO) and Brocade Communications Systems, Inc. (NASDAQ:BRCD) revealed on Wednesday that they had entered into a definitive agreement under which the former acquired the latter for roughly $5.50 billion in cash and $400 million in net debt. This represents a 47% premium from the stock’s close on Friday.
Closing of Deal
Primarily, Broadcom will use its own cash and new financing to complete the transaction.
Both the Boards of Directors of Broadcom and Brocade Communications Systems have unanimously approved the deal, which is expected to close early next year subject to regulatory requirements and the approval of Brocade Communications Systems shareholders.
What It Means for Both Companies
With the acquisition, the company aims to divest the IP Networking business of Brocade Communications Systems, strengthening its position in enterprise solutions industry. Hock Tan, Broadcom CEO and President, believes that Brocade Communications Systems’ resources and expertise in networking will play an important role in the company’s long-term growth.
“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,” emphasized Tan.
Similarly, Lloyd Carney, Brocade Communications Systems CEO, is optimistic about the strategic collaboration. Carney believes that Brocade Communications Systems can significantly help the company in expanding its product portfolio.
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Ruckus Cloudpath ES 5.0 Availability
Last week, Brocade Communications Systems Ruckus Wireless has revealed the availability of Ruckus Cloudpath ES 5.0, which primarily enables IT groups to build policy-based device access. With it, Brocade Communications Systems aims to improve seamless mobile-based operations.
Ruckus Cloudpath ES 5.0 makes it easier to facilitate centralized policy management with a simplified Public Key Infrastructure (PKI). Moreover, it enhances user experience (UX) as users no longer need to enter passwords and login details again and again when accessing networks.
The Ruckus Wireless segment currently provides wireless enterprise solutions for about 70,000 organizations around the world.
On Tuesday, Broadcom has declined 0.87% to $168.80 while Brocade Communications Systems has surged 6.04% to $11.24.
