"The phoenix must burn to emerge."
Broadcom to Buy Brocade Communications
- Enterprise Value $5.6 billion
- EV/LTM Revenue 2.4x
- EV/LTM EBITDA 11.3x
- Broadcom Limited (Nasdaq: AVGO) announced today that it agreed to acquire Brocade Communications Systems (Nasdaq:BRCD).
- Brocade investors will receive 12.75 per share in cash in the transaction, representing a 47 percent premium over Brocade’s closing price Friday.
- Broadcom shares closed today up 2.23 percent, though they declined 1.5 percent after hours.
- The transaction is scheduled to close sometime in the second half of Broadcom’s fiscal year, which began October 31.
Consolidation Continues in Semiconductor Space
- One Year Later, Making Big Waves: Broadcom Limited, originally Avago before taking Broadcom’s name as part of a $37 billion acquisition, continues to dramatically grow and improve the business – this time by expanding into storage area networking space.
- Billions and Billions Sold: The semiconductor industry has seen significant consolidation in recent months, with over $100 billion in deals in the last 24 months. Acquisitions have included Qualcomm’s agreement to purchase NXP Semiconductors for $45 billion, Intel’s $17 billion purchase of Altera and Softbank’s $32 billion acquisition of ARM Holdings.
- Targeted Growth: Broadcom also announced that it plans to divest Brocade’s IP Networking business, acquired in its $1.5 billion purchase of Ruckless Wireless in April and including wireless networking, switching and routing and software networking solutions – some of which compete with Broadcom’s largest customers such as Cisco and HP Enterprise. However, the broader acquisition is not conditional on this divestiture.
- Branching out and Lifting Pressure: Broadcom is a heavy supplier of wireless chips to smartphone manufacturers, and like Qualcomm is facing increased pressure thanks to market maturation. This deal helps diversify its customer set, preserving margins in a competitive industry.
For more information about this transaction, click here to read the press release.
martinwolf was not the advisor in this transaction.