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Computer networking midcap Brocade Communications Systems ( BRCD ) said Monday it’s agreed to acquire small-cap mobile networker Ruckus Wireless ( RKUS ) for $1.5 billion, sending Ruckus stock soaring 32%, as of midday, while Brocade stock plunged 14%. Under the deal terms, Ruckus stockholders will receive $6.45 in cash and 0.75 share of Brocade common stock for each share of Ruckus common stock, the companies said. Based on Friday’s closing price, the transaction values Ruckus at $14.43 a share, or about $1.5 billion. The actual value is closer to $1.2 billion after netting out cash being acquired, the companies said. It’s been a rough road for Ruckus, which went public priced at 15 in November 2012 and peaked four months later at 26.50. It hasn’t traded higher than 13.50 in the last 18 months, most recently touching that interim high Oct. 15. In morning trading in the stock market today , Ruckus stock was above 13, while Brocade stock was near 9, 30% off a 13-year high of 12.88 touched last June. Network gear leader Cisco Systems ( CSCO ), a rival of both companies, was down 2% midday Monday, near 28. “The acquisition will complement Brocade’s enterprise networking portfolio, adding Ruckus’ higher-growth, wireless products to Brocade’s market-leading networking solutions,” Brocade said in its press release. “It will also significantly strengthen Brocade’s strategic presence in the broader service provider space, with Ruckus’ market-leading Wi-Fi position.” Brocade expects the deal to accrete to non-GAAP earnings by its fiscal 2017’s first quarter, ending Dec. 31, 2016. Ruckus CEO Selina Lo will continue to lead that company, reporting directly to Brocade CEO Lloyd Carney. “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,” Lo said in the merger announcement. Carney said the merger “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.” Brocade’s annual revenue hasn’t grown by double-digit percentages since 2009, falling 1% in both 2013 and 2014, and growing only 2% last year to $2.26 billion. Earnings, however, grew 12% last year to $1.01 per share minus items. For its fiscal Q2 ending May 2, analysts polled by Thomson Reuters expect Brocade to grow EPS ex items by 5% to 23 cents, on revenue up less than 1%, to $552 million. Analysts expect Ruckus to report Q1 earnings up 29% to 9 cents per share, with sales rising 20% to $98.4 million. For 2015, its EPS ex items fell 1 cent to 43 cents a share against a tough comparison in 2014, when earnings doubled to 44 cents. Revenue rose 14% to $373 million. Brocade carries a good 84 IBD Composite Rating, while Ruckus carries as modest 63. Cisco earns an 81 CR. Image provided by Shutterstock . Scalper1 News
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