Broadcom To Acquire Brocade For $5.9 Billion

Broadcom Limited AVGO and Brocade Communications Systems Inc. BRCD disclosed a definitive deal through which the former would acquire the latter for $12.75 a share in cash. This would translate into a valuation of about $5.9 billion, including $0.4 billion of net debt.

The transaction would be immediately accretive to Broadcom's adjusted earnings. The company indicated the transaction would be completed by the second half of Broadcom's fiscal year 2017.

Broadcom indicated it would retain Brocade's Fibre Channel SAN Switching business while divesting IP networking business. The company believes the deal would strengthen its enterprise storage and networking solutions portfolio that serves OEM customers. The company sees an addition of $900 million of non-GAAP EBITDA in fiscal year 2018.

President and CEO Hock Tan said, "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."

Following the announcement, Brocade advanced 8.10 percent to $12.15 in the pre-market session. Broadcom closed at $168.80 on Tuesday.