Brocade buys Foundry for $3 billion

By Kevin Komiega

-- In a shot across Cisco Systems' bow, Brocade this week announced that it has inked a definitive agreement to acquire switching and routing vendor Foundry Networks for $3 billion, adding a solid Ethernet networking portfolio to Brocade's storage networking product line and giving the company a boost in its quest for unified data networks.

Under the agreement, Brocade will pay a combination of $18.50 of cash plus 0.0907 shares of Brocade common stock in exchange for each share of Foundry common stock, representing a total value of $19.25. The transaction has an aggregate purchase price of approximately $3 billion and the acquisition is expected to close in the fourth quarter.

The acquisition has been approved by the board of directors of each company and is subject to approval by Foundry's stockholders, regulatory approval, and other closing conditions. Brocade anticipates financing the acquisition through a combination of cash on hand and approximately $1.5 billion of committed debt financing from Bank of America and Morgan Stanley Senior Funding, Inc., subject to customary terms and conditions.

"We believe the industry is at an inflection point in the way enterprise and service provider networks and data centers are being architected,” says Brocade CEO Michael Klayko. "Brocade has taken an important step through this acquisition in developing a networking infrastructure strategy that will serve as the foundation for capitalizing on these dynamic opportunities.”

Yankee Group analyst and senior vice president of global enterprise research Zeus Kerravala says the acquisition will give Brocade the ability to deliver a leading, alternative solutions portfolio spanning local-, metro-, wide-, and storage area networks.

"The breadth and depth of this portfolio make Brocade a viable option for customers looking for complete networking solutions capable of addressing their constantly evolving and increasingly complex IT challenges,” says Kerravala.

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This article was originally published on July 23, 2008