Brocade Communications Strikes $1.2 Billion Deal for Ruckus Wireless

Brocade Communications Systems Inc. agreed to buy Ruckus Wireless for about $1.2 billion, expanding Brocade's wireless-products footprint in the service-provider industry.

Brocade's stock fell 13% to $9.22 in morning trading in New York, while Ruckus shares soared 31% to $13.14.

Under the terms of the agreement, Ruckus stockholders will receive $6.45 in cash and 0.75 shares of Brocade for each share of Ruckus. Based on the closing price of Brocade's stock Friday, the transaction values Ruckus at a price of $14.43 a share, or about $1.5 billion when taking the estimated cash acquired into account.

The transaction price may fluctuate until close, the companies said.

The companies expect the tie-up to accelerate cross-selling activities into the respective companies' partner and customer bases, opening up new revenue opportunities for the combined company.

"We operate in adjacent segments of the larger networking market with a number of common customers for our complementary products," said Selina Lo, chief executive of Ruckus.

The companies expect the transaction to close in Brocade's third fiscal quarter of 2016.

Brocade said it had increased its stock-repurchase program by $800 million, bringing the total remaining amount authorized under the program to about $1.7 billion. That move was meant to facilitate the repurchase of all shares issued in conjunction with the Ruckus acquisition.

Earlier Monday, Ruckus Wireless raised the lower end of its profit and revenue forecasts for the first quarter.

The company said it now expects adjusted profit of 9 cents to 10 cents a share on revenue in the range of $98 million to $101 million. In February, the company had issued guidance for first-quarter profit of 8 cents to 10 cents a share on revenue of $96 million to $101 million, according to FactSet.

The company also now expects adjusted-operating margin in the range of 9% to 11%, compared with prior guidance of 8.5% to 11%.

Ruckus, based in Sunnyvale, Calif., is a global supplier of wireless systems. It focuses on addressing capacity and coverage challenges caused by high traffic on wireless networks due to the accelerated adoption of mobile devices.

Write to Joshua Jamerson at [e-mail]

(END) Dow Jones Newswires

April 04, 2016 10:05 ET (14:05 GMT)

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