Chipmaker Broadcom Limited said Wednesday it has entered into a definitive agreement with Brocade Communications Systems, Inc. under which Broadcom will acquire Brocade, a leader in Fibre Channel storage area network switching and IP networking, for $12.75 per share in an all-cash transaction valued at approximately $5.5 billion, plus $0.4 billion of net debt.

Broadcom expects to fund the transaction with new debt financing and cash available on its balance sheet, the company said. Broadcom, with the support of Brocade, plans to divest Brocade’s IP Networking business, consisting of wireless and campus networking, data center switching and routing, and software networking solutions.

“This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers,” said Hock Tan, President and Chief Executive Officer of Broadcom. “With deep expertise in mission-critical storage networking, Brocade increases our ability to address the evolving needs of our OEM customers”

“Our best-in-class FC SAN solutions will help Broadcom create one of the industry’s broadest portfolios for enterprise storage,” said Lloyd Carney, Chief Executive Officer of 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.”

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.

 

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