Chipmaker Broadcom announced a deal to acquire network gear maker Brocade Communications for $5.9 billion, in a move that expands its network storage capabilities.
Broadcom will pay approximately $5.5 billion in cash, while assuming an extra $400 million of net debt, and will use the acquisition to strengthen its “portfolio of enterprise storage and networking solutions serving OEM customers”.
Bloomberg reported on Monday that Brocade was in talks to sell itself, with Broadcom linked to the deal.
Broadcom revealed it also plans to divest Brocade’s IP networking business, consisting of wireless and campus networking, data centre switching and routing, as well as software networking solutions.
Notably, a big part of that business was acquired as part of Brocade’s $1.2 billion acquisition of Ruckus Wireless, announced earlier this year, in a push to expand its wireless offering.
“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 stage of growth,” said Hock Tan, president and CEO of Broadcom.
Brocade CEO Lloyd Carney said in a blog post said it was not looking to sell, and was confident in its strategy following the Ruckus acquisition, before Broadcom approached it with a compelling offer.
The final price represents a 47 per cent premium from Brocade’s closing share price last Friday (28 October).
Brocade competes mainly with network giant Cisco, and makes switches and routers for data centres, as well as storage area networking, providing fast links between data storage and services.