NEW YORK (TheStreet) -- Shares of Broadcom (AVGO) were advancing late Wednesday morning after the company agreed to acquire Brocade Communications Systems (BRCD) for $5.9 billion, including $0.4 billion of debt.
Shares of Brocade were soaring 10.28% to $12.40 on heavy trading volume this morning.
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 said it expects to fund the deal with new debt financing and cash available on its balance sheet.
The chipmaker also plans to divest Brocade's IP networking business, including its wireless and campus networking, data center switching and routing and software networking 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.
"This strategic acquisition enhances Broadcom's position as one of the leading providers of enterprise storage connectivity solutions to OEM customers," Broadcom CEO Hock Tan said in a statement.
More than 68.50 million of Brocade's shares changed hands so far today vs. its average 30-day volume of 6.45 million shares.
Separately, TheStreet Ratings Team has a "Hold" rating with a score of C+ on Broadcom stock.
The primary factors that have impacted the rating are mixed. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and good cash flow from operations.
But the team also finds weaknesses including deteriorating net income and disappointing return on equity.
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.
You can view the full analysis from the report here: AVGO