NEW YORK (TheStreet) -- Shares of Brocade Communications Systems (BRCD) were spiking 7.92% to $12.13 in pre-market trading on Wednesday after Broadcom (AVGO) agreed to buy the company for $5.9 billion, including $0.4 billion of debt.
Broadcom will pay $12.75 per share in cash for the San Jose, CA-based supplier of networking hardware, software and services.
The transaction represents a 47% premium over Brocade's closing share price on October 28.
Broadcom expects to fund the deal with new debt financing and cash available on its balance sheet, according to a statement.
The chipmaker also plans to divest Brocade's IP networking business, including its wireless and campus networking and data center switching and routing solutions.
Upon closing, the deal is expected to be immediately accretive to Broadcom's non-GAAP free cash flow and earnings per share.
The transaction is expected to close in the second half of Broadcom's fiscal 2017 year.
Shares of Broadcom closed lower on Tuesday.
Separately, TheStreet Ratings Team has a "Buy" rating with a score of B- on Brocade stock.
The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins.
The team believes its strengths outweigh the fact that the company has had sub par growth in net income.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.