Brocade buys Ruckus in move into IoT
April 7, 2016
Enterprise networking specialist Brocade is buying enterprise Wi-Fi networking vendor Ruckus in a move designed to expand Brocade’s position in workplace and industrial IoT environments as well as Smart Cities and Smart Buildings and other IoT segments.
Brocade has agreed to pay about $1.2 billion for Ruckus. The deal values Ruckus shares at $14.43 each, which caused Ruckus shares to jump over 30% in value in trading, and Brocade shares to fall around 14%.
The deal is expected to improve Brocade’s non-GAAP profits by first quarter of its 2017 financial year, according to the company.
The Ruckus organization will be led by current Ruckus CEO, Selina Lo, and report directly to Brocade CEO, Lloyd Carney.
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. 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 deal will 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.
The company also believes that the acquisition will 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.
Brocade and Ruckus believe that the integration of Wi-Fi and the use of shared access or lightly licensed spectrum are critical to meeting the ever-growing demand 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.
"This strategic combination will position us to expand our addressable market and technology leadership with Ruckus' fast-growing wireless LAN products, and supports our vision to deliver market-leading New IP solutions that enable the network to become a platform for innovation," said Lloyd Carney, chief executive officer of Brocade. "History shows that focused, pure-play companies often innovate faster, are more agile, and deliver better value to their customers. With the rapidly evolving requirements of the digital transformation era, we are positioning ourselves to lead where technology is headed. We believe that combining our portfolios will provide significant benefits to our customers and will enable us to accelerate our growth and value creation."
"The combination of our two companies will create an exciting new thought leader in networking and significant opportunities for our stakeholders to participate in the combined company's future growth potential," said Selina Lo, president and CEO of Ruckus. "We operate in adjacent segments of the larger networking market with a number of common customers for our complementary products, and have a successful track record of working together. We are excited for the opportunity to join the Brocade team and to jointly deliver innovative, value-added solutions to our enterprise and service provider customers."
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.