Brocade Communications (BRCD) Reports Update on Proposed Broadcom (AVGO) Acquisition
Brocade (NASDAQ: BRCD) today announced that, following discussions with the Committee on Foreign Investment in the United States, Brocade and Broadcom Limited (NASDAQ: AVGO) withdrew and re-filed their joint voluntary notice to CFIUS to allow more time for review and discussion with CFIUS in connection with the proposed acquisition of Brocade by Broadcom. CFIUS has agreed to proceed directly to a 45-day investigation period, thereby shortening the customary 75-day CFIUS review period.
To allow for the additional CFIUS review period, on October 2, 2017, Brocade and Broadcom agreed to refrain from exercising their right to terminate the merger agreement for failure to close the proposed acquisition by the November 1, 2017 end date under the merger agreement. The merger agreement remains in full force and effect. Brocade and Broadcom now anticipate the acquisition to be completed by November 30, 2017, subject to clearance from CFIUS.
Brocade also announced that it has signed an agreement with Extreme Networks to directly divest its data center switching, routing and analytics business. The proposed transaction would be completed in lieu of the previously announced sale of that business by Broadcom to Extreme Networks following Broadcom's proposed acquisition of Brocade. Brocade and Extreme Networks presently expect to close this transaction prior to the closing of Broadcom's acquisition of Brocade, subject to the satisfaction or waiver of customary closing conditions. The transaction does not require shareholder approval by either company, and is not subject to any financing condition.
"We are actively engaged with CFIUS and remain committed to Broadcom's proposed acquisition of Brocade," said Lloyd Carney, CEO of Brocade. "We continue to work diligently and cooperatively with Broadcom to close the transaction as soon as possible in a challenging and dynamic policy and regulatory environment. In the meantime, we are pleased to announce an agreement to divest our data center networking business to Extreme Networks, which we believe is in the best interest of our shareholders, customers, partners and the employees aligned with the business."
"Over the past year, we have taken a number of important steps to align our overall business and cost structure with changing business conditions," Carney continued. "We have completed our planned divestitures of certain software networking assets, lowered our headcount and executed a number of cost-reduction measures. With these changes, Brocade is better positioned to continue to benefit from our market-leading position in storage area networking business, and from exciting growth trends in wired and wireless campus networking."
"We are fully committed to the acquisition of Brocade and are working closely with CFIUS and Brocade to complete this transaction," stated Tom Krause, Chief Financial Officer of Broadcom.
Forward-Looking Statements This press release contains forward-looking statements including, but not limited to, statements regarding Brocade's goals, plans, strategy, business outlook and prospects, as well as statements regarding the expected completion and timing of the proposed acquisition of Brocade by Broadcom and the proposed sale of Brocade's data center networking business to Extreme Networks. These statements are based on current expectations as of the date of this press release and involve a number of risks, uncertainties and assumptions that may cause actual results to differ significantly. The risks, uncertainties and assumptions include, but are not limited to: the effect on Brocade of increasing market competition and changes in the industry; the impact on Brocade of conditions in the market for Storage Area Networking products; Brocade's ability to execute on its sales strategy and plans for future operations; the impact on Brocade of macroeconomic trends and events and changes in IT spending levels; Brocade's ability to introduce and achieve market acceptance of new products and support offerings on a timely basis; risks associated with Brocade's international operations; and integration and other risks associated with acquisitions, divestitures and strategic investments. The risks, uncertainties and assumptions also include, but are not limited to: the risk that the proposed transactions may not be completed in a timely manner or at all, which, particularly in the case of the proposed Broadcom acquisition, may adversely affect Brocade's business and the price of the common stock of Brocade; the failure to satisfy any of the conditions to the consummation of the proposed transactions, including clearance from CFIUS of the proposed Broadcom acquisition; the occurrence of any event, change or other circumstance that could give rise to the termination of the Broadcom merger agreement or the purchase agreement with Extreme Networks; the effect of the announcement or pendency of the proposed transactions on Brocade's business relationships, operating results and business generally; risks that the proposed transactions disrupt current plans and operations and the potential difficulties in employee retention as a result of the proposed transactions; risks related to diverting management's attention from Brocade's ongoing business operations; the outcome of legal proceedings that have been and may in the future be instituted against Brocade related to the Broadcom merger agreement, the purchase agreement with Extreme Networks or the proposed transactions; and unexpected costs, charges or expenses resulting from the proposed transactions. Certain of these and other risks are set forth in more detail in Brocade's Form 10-Q for the fiscal quarter ended July 29, 2017, and in Brocade's Annual Report on Form 10-K for the fiscal year ended October 29, 2016. Brocade does not assume any obligation to update or revise any such forward-looking statements whether as the result of new developments or otherwise.