Brocade has entered into a definitive agreement to acquire Ruckus Wireless, in a $US1.2 billion deal designed to build a networking powerhouse capable of competing in the digital transformation era.
The acquisition - revealed to local partners across Australia and New Zealand overnight - will complement Brocade's enterprise networking portfolio, adding Ruckus' higher-growth, wireless products to the company’s networking solutions.
As such, Brocade hopes the move will “significantly strengthen” its strategic presence in the broader service provider space, building on Ruckus' market-leading Wi-Fi position across the world.
With the transaction expected to close during the third quarter of Brocade’s fiscal year - ending July 31 2016 - the Ruckus organisation will be led by current Ruckus CEO, Selina Lo, reporting directly to Brocade CEO, Lloyd Carney.
“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 says.
“History shows that focused, pure-play companies often innovate faster, are more agile, and deliver better value to their customers.
"With the rapidly evolving requirements of the digital transformation era, we are positioning ourselves to lead where technology is headed.
"We believe that combining our portfolios will provide significant benefits to our customers and will enable us to accelerate our growth and value creation."
Terms of the agreement
Under the terms of the agreement, Ruckus stockholders will receive $US6.45 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, the transaction values Ruckus at a price of $US14.43 per common share, or approximately $US1.5 billion, and may fluctuate until close.
According to Carney, net of estimated cash acquired, the transaction value is approximately $US1.2 billion.
Carney says the cash portion of the purchase price will be funded through a combination of cash on hand and new bank term loan financing.
“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,” adds Selina Lo, president and CEO, Ruckus.
“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.
“We are excited for the opportunity to join the Brocade team and to jointly deliver innovative, value-added solutions to our enterprise and service provider customers.”
Local channel changes
In Australia, Ruckus is represented by Connector Systems - recently acquired by Ingram Micro, Hills and Dicker Data, with Brocade currently under the distributorship of Avnet and Lynx Technologies.
Across the Tasman in New Zealand, Exeed and Connector Systems distribute the Ruckus portfolio, with Brocade falling under both the Connector Systems and Westcon-Comstor brands.
Following the news, Ruckus Wireless Chief Commercial Officer Ian Whiting told local partners - via correspondence seen by ARN - that the team will be making efforts locally to engage with the channel as ongoing future developments materialise.
“Rest assured that your Ruckus Partner Account Manager or Systems Engineer, or their manager, will be reaching out to you over the coming days to answer any additional questions you may have,” Whiting states.
“First, both companies are 100 percent committed to business as usual for the foreseeable future. Both companies will continue to operate independently until the transaction is closed.
"Post close, Ruckus will reaffirm a clear commitment to delivering on the roadmap that we have publicly communicated over the last year and which will be updated at upcoming Big Dogs events in Europe, Asia and America."
According to Whiting, all aspects of the Big Dogs partner program, including partner levels, certification, sales programs, discounting, and so on will remain in place and unchanged at this time.
“Over time, we expect the integration of Ruckus with Brocade will bring our collective partners greater opportunities to offer a broader portfolio of wired and wireless LAN solutions,” Whiting adds.
Lastly, Whiting says the Ruckus sales and sales engineering teams that have been supporting partners “will not change” going forward.
“The Ruckus sales and customer support teams are two of the assets that Brocade values most highly,” Whiting adds.
“Throughout this process, we will strive to make this a frictionless transition for our customers and partners, with minimal distractions so you can continue to effectively market, sell and service Ruckus solutions.”