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Brocade To Acquire Ruckus Wireless To Build A Networking Company For The Digital Transformation Era

Enhances Brocade’s Position as a Pure-Play Networking Company, Addressing Critical Networking Requirements From the Data Center to the Wireless Network Edge

  • Combined company expected to be #1 in storage area networking, #1 in service provider Wi-Fi, #2 in data center networking, #3 in enterprise wireless LAN, and #3 in enterprise edge networking in the U.S. and EMEA

  • Transaction expected to be accretive to Brocade’s non-GAAP earnings by Q1 FY17

  • Brocade increases stock repurchase authorization by $800 million

Brocade and Ruckus Wireless  today announced that Brocade has entered into a definitive agreement to Brocade_LOGO_It Voiceacquire Ruckus Wireless, Inc. in a cash and stock transaction. The acquisition will complement Brocade’s enterprise networking portfolio, adding Ruckus’ higher-growth, wireless products to Brocade’s market-leading networking solutions. It will also significantly strengthen Brocade’s strategic presence in the broader service provider space, with Ruckus’ market-leading Wi-Fi position. Brocade expects the transaction to be accretive to its non-GAAP earnings by its first quarter of fiscal 2017. 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. Based on the closing price of Brocade’s stock on April 1, 2016, the transaction values Ruckus at a price of $14.43 per common share, or approximately $1.5 billion, and may fluctuate until close. Net of estimated cash acquired, the transaction value is approximately $1.2 billion.The cash portion of the purchase price will be funded through a combination of cash on hand and new bank term loan financing.

As companies move to digitize their business, they need an underlying network architecture that supports business agility. This New IP architecture enables the network to become a platform for innovation and for developing, delivering, and securing new applications. Wireless is a critical access technology and the combination of Brocade and Ruckus creates a new type of pure-play networking company, with solutions spanning from the heart of the data center to the wireless network edge. In addition, after close, the acquisition is expected to 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.

Further, 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 acquisition will be conducted by means of an exchange offer for all of the outstanding shares of Ruckus. The completion of the exchange offer is subject to customary conditions, including reviews by U.S. and international antitrust regulators and the tender of a majority of the outstanding shares of Ruckus’ common stock. 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.

Brocade Increases Stock Repurchase Authorization by $800 Million
Brocade also announced today that its Board of Directors has increased the authorization to repurchase its common stock under its existing stock repurchase program by $800 million, bringing the total remaining amount authorized under the program to approximately $1.7 billion. This increase is intended to facilitate the repurchase of all shares issued in conjunction with the Ruckus acquisition. While Brocade has targeted the repurchase of all those shares within six months of the closing of the acquisition, the timing and amounts of these acquisition-related repurchases will be determined by Brocade, based on the trading price of Brocade’s common stock, general business and market conditions, and other factors. The repurchases may be made in the open market or in privately negotiated transactions.

Webcast Information

The companies will hold a joint webcast today at 5:30 a.m. PT (8:30 a.m. ET) to discuss this announcement. The webcast can be accessed via Brocade’s IR website at HTTP://WWW.BRCD.COM/EVENTS.CFM and Ruckus’ IR website at HTTP://INVESTORS.RUCKUSWIRELESS.COM. A replay of the webcast will be available for 90 days following the call at HTTP://WWW.BRCD.COM/EVENTS.CFM andHTTP://INVESTORS.RUCKUSWIRELESS.COM.

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