Mumbai: The global chip maker Broadcom today announced that it has agreed to acquire Brocade Communications Systems, a maker of routers, switches and other computer networking equipment, for USD 5.5 billion in cash plus USD 0.4 billion of net debt.The transaction came more than a year after Avago Technologies agreed to acquire Broadcom for USD 37 billion and took the Broadcom name.
“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, 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,” added Tan.
“This transaction represents significant value for our shareholders, who will receive a 47 percent premium from the Brocade closing share price on Friday, October 28, 2016, and creates new opportunities for our customers and partners,” said Lloyd Carney, chief executive officer, Brocade.
“We will work with Broadcom as it seeks to find a buyer for our IP Networking business which includes a full portfolio of open, hardware and software-based solutions spanning the core of the data center to the network edge,” added Carney.
The board of directors of Brocade and the executive committee of the board of directors of Broadcom have unanimously approved the transaction, which is presently expected to close in the second half of Broadcom’s fiscal year 2017 which commenced on October 31, 2016, subject to regulatory approvals in various jurisdictions, customary closing conditions as well as the approval of Brocade’s stockholders.
The acquisition is the latest deal in the rapidly consolidating semiconductor industry. Last week, Qualcomm agreed to acquire NXP Semiconductors for USD 38.5 billion. In July, SoftBank of Japan bought ARM Holdings, a British chip designer, for USD 32 billion. Intel paid nearly USD 17 billion for Altera and NXP itself acquired Freescale Semiconductor, for USD 11.8 billion last fiscal. For Broadcom, the Brocade deal represents the latest in a series of transactions since the company formerly known as Avago went public in 2009.
Broadcom has a strong channel presence in India. Avnet India Pvt. Ltd, Mouser, Edom Technology Co., LTD and Digi-Key are some of the strategic partners of the company. There is no clarity on the immediate impact on the channel business post acquisition, however, partners are quite exited about the deal as it is expected to expand their solutions offering portfolio.