Posted by: rivkalittle
Cisco, News, Rivka Little
Brocade snagged $1.2 billion in funding for its $3 billion acquisition of Foundry Networks Tuesday, a day when the Dow Jones fell more than 500 points and technology companies were slammed.
The financing, which came from Banc of America Securities, Morgan Stanley Senior Funding, HSBC Bank USA and Keybank National Association, includes a $1.1 billion term loan and a $125 million revolving credit facility.
Brocade said it expects to raise another $400 million in financing and will use cash on hand for the rest of the acquisition.
The storage company had been on the hot seat about how it would finance the Foundry deal. Executives were grilled at their analyst day last month about where the funding would come from even as executives extolled the importance of expanding into Ethernet networking through the Foundry acquisition, SearchStorage.com reported.
Foundry’s shares rallied a bit after the news of the financing to $17. But that’s still significantly lower than the $18.50 in cash per share that Brocade will pay.
Brocade first announced the acquisition in July, saying that the addition of Foundry’s technology would give it an end-to-end networking portfolio that could rival Cisco. Analysts were excited at that prospect and were positive about the merging of two financially sound companies with innovative technology. That is likely why Brocade was able to pull off financing even amid market chaos.
The deal has already cleared U.S. and European regulatory review and votes by the boards of each company, but is subject to a vote by Foundry stockholders scheduled for October 24.