Brocade Communications Systems Inc. (NASDAQ: BRCD) and Ruckus Wireless Inc. (NYSE: RKUS) made waves in Monday’s regular trading session following the announcement of an agreement. Both companies have entered into a definitive agreement where Brocade will acquire Ruckus in a transaction valued at roughly $1.2 billion.
This is a cash and stock transaction in which, 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 Brocade’s most recent closing price, the transaction values Ruckus at a price of $14.43 per common share, or about $1.5 billion, and may fluctuate until the close. Net of estimated cash acquired, the transaction value is approximately $1.2 billion.
Lloyd Carney, chief executive of Brocade, commented:
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. 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.
Selina Lo, president and CEO of Ruckus, added:
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. 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.
Shares of Brocade were trading down 16% at $8.94 on Monday, with a consensus analyst price target of $10.38 and a 52-week trading range of $7.40 to $12.88.
Shares of Ruckus traded up 30% at $13.03, with a consensus price target of $11.30 and a 52-week range of $7.25 to $13.50.