Continuing a consolidation among semiconductor companies, Broadcom (AVGO) on Wednesday said it would buy Brocade Communications Systems (BRCD) for $5.9 billion, including assumed debt. The transaction reflects Broadcom's aggressive acquisition strategy.
The payout comes to $12.75 per share in cash and marks a 47% premium from Friday's close, before reports anticipating the deal surfaced. Broadcom will assume $400 million in net debt in the transaction.
Shares of Brocade were up $1.12, or 10%, to $12.36 on Wednesday morning, while Broadcom stock gained $2.27, or 1.3%, to $171.07.
Broadcom has been a prodigious buyer. The former Avago Technologies bought Broadcom for about $37 billion in February and assumed the buyer's name. The Singapore and San Jose, Calif., chipmaker acquired Emulex for $609 million in 2014 and LSI for $6.6 billion in 2013.
Intel (INTC) also has participated in the consolidation with the $16.7 billion purchase of Altera last year, and NXP in December completed an $11.8 billion purchase of Freescale Semiconductor.
Fitch Ratings analyst Jason Pompeii suggested the deals will continue. "We believe consolidation in the chip industry will continue through the intermediate term within the context of cheap financing and tepid demand in more mature semiconductor markets," Pompeii wrote in a Wednesday report.
Acquiring Brocade will establish a larger player in storage area network, or SAN, switching. Broadcom plans to divest Brocade's internet protocol networking, which makes components for wireless networking, systems on corporate campuses and data center switching and routing, among other areas.