Brocade Communication Systems, Inc. Stock Soars on $5B+ Broadcom Deal

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Brocade Communication Systems, Inc. (NASDAQ:BRCD) shares are on the rise on the news that Broadcom Corporation (NASDAQ:BRCM) is acquiring it.

Brocade CommunicationsSome reports claim the deal is worth $5.5 billion, while others believe Broadcom is paying $5.9 billion for the network hardware provider. The move comes at a time in the semiconductor industry when companies are looking to boost their offerings, which in some cases is resulting in mergers and acquisitions.

The compatibility between the two companies is a result of the components that go into Brocade’s networking equipment. Broadcom CEO said its rival is an expert in “mission-critical storage networking.”

Additionally, the company has original equipment manufacturer capabilities that will boost its offerings. The deal is reportedly worth $12.75 a share for Brocade investors, which will they receive in cash.

This price marks a 47% premium to Brocade’s closing price Friday. Brocade CEO Lloyd Carney said the company was not looking to sell, but its rivals came in with an enticing offer that his company could not pass up.

Brocade’s shareholders and regulators have yet to approve the transaction, which is slated to close in the second half of Broadcom’s 2017 fiscal year. This year began on Oct. 31.

Semiconductor industry acquisitions have amounted to more than $100 billion in deals over the last two years.

BRCD stock is gaining 9.6% Wednesday.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/11/brocade-brcd-broadcom-brcm/.

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