Ruckus Investors Win Big; Brocade Purchasing Co. For $14.43/Share In Total Value

Shares of Ruckus Wireless Inc RKUS surged higher by more than 30 percent ahead of Monday's market open after Brocade Communications Systems, Inc. BRCD confirmed it will acquire the company in a cash and stock transaction.

As part of the agreement, Ruckus shareholders will receive $6.45 in cash and 0.75 shares of Brocade stock for each share of Ruckus they hold. The transaction implies a total consideration of $14.43 per share and a total buyout value of approximately $1.5 billion.

Shares of Ruckus Wireless closed for trading at $10.00 on Friday. The stock has lost more than 6 percent since the start of 2016 and more than 20 percent over the past year.

Related Link: Goldman: Ruckus Wireless Is No Longer On Our Conviction Buy List

Prior to the M&A announcement on Monday, Ruckus Wireless provided encouraging first-quarter guidance. The company said it expects to earn $0.09 to $0.10 per share on revenue of $98 to $101 million. Wall Street analysts were already estimating the company to earn $0.09 per share on revenue of $98.36 million.

Brocade expects the transaction to be accretive to its non-GAAP earnigns by the first quarter of fiscal 2017 as the combined entity. The company also announced that its board of directors boosted its share repurchase program by $800 million, which brings the total authorization to around $1.7 billion.

"This strategic combination will position us to expand our addressable market and technology leadership with Ruckus' fast-growing wireless LAN products, and supports our vision to deliver market-leading New IP solutions that enable the network to become a platform for innovation," said Lloyd Carney, chief executive officer of Brocade. "History shows that focused, pure-play companies often innovate faster, are more agile, and deliver better value to their customers. With the rapidly evolving requirements of the digital transformation era, we are positioning ourselves to lead where technology is headed. We believe that combining our portfolios will provide significant benefits to our customers and will enable us to accelerate our growth and value creation."

"The combination of our two companies will create an exciting new thought leader in networking and significant opportunities for our stakeholders to participate in the combined company's future growth potential," said Selina Lo, president and CEO of Ruckus. "We operate in adjacent segments of the larger networking market with a number of common customers for our complementary products, and have a successful track record of working together. We are excited for the opportunity to join the Brocade team and to jointly deliver innovative, value-added solutions to our enterprise and service provider customers."