"The phoenix must burn to emerge."
-Janet Fitch
November 02,2016
Broadcom to Buy Brocade Communications
Financial Information
- Enterprise Value $5.6 billion
- EV/LTM Revenue 2.4x
- EV/LTM EBITDA 11.3x
Transaction Facts
- 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.
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 For more information about this transaction, click here to read the press release.
martinwolf was not the advisor in this transaction.
