Brocade set to acquire Ruckus Wireless for $1.2 billion to enhance networking portfolio
Brocade entered into a definitive agreement Monday to acquire Ruckus Wireless in a cash and stock transaction. The acquisition will complement Brocade’s enterprise networking portfolio, adding higher-growth, wireless products to its existing networking line. It will also strengthen Brocade’s presence in the broader service provider space, with Ruckus’ Wi-Fi position.
The acquisition will also strengthen Brocade’s ability to pursue emerging market opportunities around 5G mobile services, Internet of Things (IoT), Smart Cities, OpenGtm technology for in-building wireless, and LTE/Wi-Fi convergence.
The two companies believe that the integration of Wi-Fi and the use of shared access or lightly licensed spectrum are critical to meet growing need for coverage, capacity, and consistency required for next-generation mobile services. These elements are important in Brocade’s strategy to disrupt and enhance the way edge services are created and delivered.
Under the terms of the agreement, Ruckus stockholders will receive $6.45 in cash and 0.75 shares of Brocade common stock for each share of Ruckus common stock. Based on the closing price of Brocade’s stock on April 1, 2016, the transaction values Ruckus at a price of $14.43 per common share, or approximately $1.5 billion, and may fluctuate until close. Net of estimated cash acquired, the transaction value is approximately $1.2 billion.The cash portion of the purchase price will be funded through a combination of cash on hand and new bank term loan financing.
Brocade expects the transaction to be accretive to its non-GAAP earnings by its first quarter of fiscal 2017. The Ruckus organization will be led by current Ruckus CEO, Selina Lo, and report directly to Brocade CEO, Lloyd Carney.
The acquisition will be conducted by means of an exchange offer for all of the outstanding shares of Ruckus. The completion of the exchange offer is subject to customary conditions, including reviews by U.S. and international antitrust regulators and the tender of a majority of the outstanding shares of Ruckus’ common stock. The companies expect the transaction, which has been approved by both companies’ boards of directors, to close in Brocade’s third fiscal quarter of 2016.
As companies move to digitize their business, they need an underlying network architecture that supports business agility, and whose IP architecture enables the network to become a platform for innovation and for developing, delivering, and securing new applications.
Wireless is a critical access technology and the combination of Brocade and Ruckus creates a new type of pure-play networking company, with solutions spanning from the heart of the data center to the wireless network edge. In addition, after close, the acquisition is expected to accelerate cross-selling activities into the respective companies’ partner and customer bases, opening up new revenue opportunities for the combined company across a variety of verticals, including large enterprises, K-12 and higher education, government, hospitality, and service providers.
Brocade and Ruckus have integrated wired and wireless capabilities to deliver improved performance, security, and manageability at the lowest total cost of ownership (TCO). Brocade ICX Switches with link aggregation provide ideal backhaul for the Ruckus 802.11AC Wave 2 R710 access points, which have a throughput of over 2.5 gigabits-per-second (Gbps).
The IP networking products from both companies provide native security and encryption capabilities. Combined with security provider products, they offer flexible and open solutions to protect a range of network environments. These security solutions deliver a reliable, resilient network infrastructure that is secured from the wireless access to the edge to the core, and from client to server, providing preemptive security that helps ensure business continuity and regulatory compliance.