Brocade to buy Ruckus Wireless in $2bn deal

Network gear maker Brocade Communications Systems will buy Ruckus Wireless in a A$2 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 connectivity to their customers.

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

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

Net of Ruckus's cash on hand, the deal value is about A$1.6 billion, the companies said.

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

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

Ruckus stockholders will get US$6.45 in cash and a three-quarter 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.

Brocade also raised its share buyback program by A$1.05 billion, taking the total remaining under the existing program to about A$2.25 billion.

The company said it expected the deal to add to its adjusted earnings by its first quarter of fiscal 2017.

Chief executive Selina Lo will continue to lead the Ruckus business, reporting to Brocade chief executive Lloyd Carney.