Broadcom to acquire networking solutions provider Brocade for $5.5 billion

Chipmaker Broadcom Ltd said on Wednesday it would buy network gear maker Brocade Communications Systems Inc for $5.5 billion to expand its fiber channel and data storage businesses, the latest in a flurry of chip sector deals.

Singapore-based Broadcom, formerly Avago Technologies, is known for its connectivity chips while California-based Brocade makes networking hardware, software and storage products.

Broadcom said it planned to integrate Brocade’s fiber channel storage networking products used in data centers and sell the company’s IP networking business.

Broadcom has a significant piece in the storage area network market and is very complementary with Brocade’s, Drexel Hamilton analyst Cody Acree told Reuters.

The $12.75 per share offer represents a premium of 46.7% to Brocade’s close on Friday.

Brocade’s shares were trading up 9% at $12.25, while Broadcom’s stock rose 1.5% to $171.41. Up to Tuesday’s close, Brocade’s shares had gained nearly 30% since Bloomberg reported on Monday that the company was in talks to sell itself.

The chip industry has been undergoing rapid consolidation as companies try to capture market share, much of it related to connected devices and cars, and Avago/Broadcom has been one of the sector’s most prolific acquirers.

Since taking over the top job at Avago a decade ago, chief executive Hock Tan has turned around a small chipmaker into a giant with a market capitalization of $67 billion.

In the biggest chip deal ever, smartphone chipmaker Qualcomm Inc agreed last week to buy NXP Semiconductors NV for about $38 billion, making it the leading supplier to the fast-growing automotive chips market.

The Qualcomm-NXP deal topped Avago’s $37 billion acquisition of Broadcom Corp last year that formed Broadcom Ltd. Broadcom’s top customers include Cisco Systems, Hewlett Packard Enterprise and Intel Corp.

SOURCE: PTI