Shares in Ruckus Wireless jumped more than 31% in afternoon trading Monday after Brocade announced it had agreed to acquire the supplier of wireless gear and control systems that counts Time Warner Cable, Bright House Networks and Cablevision Systems among its WiFi technology clients.
Under terms of the deal 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 $14.43 per common share, or approximately $1.5 billion, though that number could fluctuate until the deal is closed. Net of estimated cash acquired, the transaction value is approximately $1.2 billion, they said.
Ruckus, which struck a global reselling deal with Arris in 2011, saw its shares soar on the news – its stock was up 31.60% ($3.16 each) to $13.16 each in afternoon trading. Brocade shares went into opposite direction -- they were down 13.96% ($1.49 each) to $9.15 each at last check.
Brocade said the deal will complement its own enterprise networking portfolio with Ruckus’s “higher-growth wireless products” while strengthening Brocade’s strategic presence in the broader service provider space. Brocade said the deal will also help in its pursuit of emerging market opportunities around 5G, the Internet of Things, and LTE/WiFi convergence.
Ruckus competes in the WiFi arena with companies such as Cisco Systems and Ericsson, which acquired BelAir Networks in 2012.
The Ruckus organization will be led by current Ruckus CEO, Selina Lo, and report directly to Brocade CEO, Lloyd Carney, the companies said.
Notably, Lo is scheduled to speak next Wednesday (April 13) at the CableLabs Inform[ed] Wireless event in New York in a session titled: “Evolution of Cable Networks and Mobile Opportunities”
"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,” Carney said in a statement.
"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,” added Lo. "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.”
They said the deal, which has been approved by the boards of both companies, is expected to close in the third quarter of Brocade’s fiscal Q3.
Ruckus also announced updated Q1 2016 guidance. It expects total revenues of $98 million to $101 million, and non-GAAP diluted net income per share of $0.09 to $0.10.
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