Chip maker Broadcom to Buy Brocade for $5.5 Billion
November 02 2016 - 8:00AM
Dow Jones News
Chip maker Broadcom Ltd. said on Wednesday that it agreed to buy
network-equipment firm Brocade Communications Systems Inc. for $5.5
billion, expanding its storage networking offerings amid slowing
smartphone sales world-wide.
Under the deal's terms, Broadcom will pay $12.75 a share for
Brocade, a 47% premium to where Brocade shares closed on Friday,
before news outlets reported on talks of a deal.
Shares of Brocade rose 8.3% to $12.16 in premarket trading as
Broadcom's stock was unchanged from $168.80 as of Tuesday's
close.
Broadcom chips perform tasks such as filtering signal
interference common in phones that operate on several spectrum
bands.
Hock Tan, Broadcom's chief executive, said the tie-up would help
the company "address the evolving needs" of its customers, such as
Apple Inc., which uses Broadcom's chips in the iPhone. In its
September quarter, Apple said it sold 45.5 million iPhones, 2.5
million fewer than a year earlier.
Broadcom said it plans to divest Brocade's IP networking
business, including Ruckus Wireless, which Brocade agreed to buy in
April for $1.2 billion.
The deal with Brocade, subject to regulatory approval, is seen
as closing in the second half of Broadcom's current year, which
began on Oct 31.
Broadcom was formed in February with the completion of a $37
billion deal that joined Avago Technologies Ltd. with Broadcom
Corp., at the time the biggest chip deal ever.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
November 02, 2016 08:45 ET (12:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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