Broadcom buys Brocade for £4.74 billion

November 3, 2016 // 11:14 a.m.

Tags: #acquire #acquisition #fibre-channel #financial #hock-tan #san #storage-area-network

Companies: #broadcom

Broadcom, best known to the public for its work on the hardware that powers the Raspberry Pi family of microcomputers, has announced the acquisition of network storage specialist Brocade in a deal valued at £4.74 billion.

The deal, announced late last night, will see Broadcom acquire Brocade for $5.5 billion in cash plus $0.4 billion of net debt, which the company has stated it will fund with new debt financing and available cash. For Broadcom, it's a chance to push harder into the datacentre using Brocade's fibre-channel storage area network (FC-SAN) technologies; for Brocade shareholders, a major payday with the deal valuing the company at nearly a 50 percent premium over its Friday closing price.

Broadcom's interests in the company are clear, and do not include Brocade's other businesses divisions: while the network storage arm of the company will be retained by Broadcom, it plans to sell off Brocade's internet protocol (IP) networking divisions. Thus far, Broadcom has not named potential buyers.

'This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers', claimed Broadcom president and chief executive Hock Tan. '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.'

'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,' added Brocade chief executive Lloyd Carney of the deal. 'Our best-in-class FC SAN solutions will help Broadcom create one of the industry's broadest portfolios for enterprise storage. 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 datacentre to the network edge.'

The acquisition marks the latest in a string of billion-dollar deals in the semiconductor industry, including Broadcom rival Qualcomm's purchase of NXP Semiconductor for £38.62 billion, SoftBank's acquisition of ARM for £24.3 billion, Microchip buying Atmel for £2.86 billion, Intel picking up Altera for £13.43 billion, and Western Digital snagging SanDisk for £15.27 billion.
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