Brocade to buy Ruckus Wireless in $1.5 billion deal

Mon Apr 4, 2016 11:54am EDT
 
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By Abhirup Roy

(Reuters) - Network gear maker Brocade Communications Systems Inc (BRCD.O: Quote) said it would buy Ruckus Wireless Inc RKUS.N in a $1.5 billion deal, aiming to tap into the growing demand for Wi-Fi access over large areas such as offices and stadiums.

Ruckus, which counts the Marriott group and the Angel baseball stadium in Los Angeles among its customers, makes controllers and access points that help businesses offer high-speed Internet to their customers.

Based on Friday closing prices, the deal values Ruckus at $14.43 per share, a premium of 44 percent.

Ruckus shares were trading at $13 in morning trading on Monday, while Brocade dropped 15 percent to $9.04.

Net of Ruckus's cash on hand, the deal value is about $1.2 billion, the companies said.

Macquarie Research analyst Rajesh Ghai said the deal made sense as the companies offered complimentary products and would provide Brocade with "some more ammunition" to expand into the services industry.

Ghai added it was unlikely that a second bidder would emerge.

Ruckus stockholders will get $6.45 in cash and 0.75 share of Brocade common stock for each share held. The cash portion of the deal will be funded with cash on hand and a new loan, the companies said.   Continued...