Broadcom Limited said Wednesday that it had entered into a definitive agreement to acquire Brocade Communications Systems Inc. for $5.9 billion. The price breaks down to $12.75 per share in an all-cash transaction, which is valued at $5.5 billion plus $0.4 billion of debt. Broadcom said it would fund the purchase with new debt financing and cash available. With the acquisition Broadcom would retain Brocade's Fibre Channel SAN switching business but divest its IP networking business. Once closed, the deal is expected to be immediately accretive to Broadcom's non-GAAP free cash flow and earnings per share. It is expected to add about $900 million in non-GAAP EBITDA in fiscal year 2018. The deal is expected to close in the second half of Broadcom's fiscal year 2017, which began on Oct 31. Shares of Brocade Communications Systems were up 9% in premarket trade.
Copyright © 2016 MarketWatch, Inc.