July 21, 2008 / 10:17 PM / 11 years ago

UPDATE 1-Brocade to buy Foundry Networks for $3 bln

(Adds executive’s comments, share move)

NEW YORK, July 21 (Reuters) - Brocade Communications Systems Inc BRCD.O said on Monday it plans to buy data equipment maker Foundry Networks FDRY.O for around $3 billion to expand its product line, customer reach and sales channels.

Brocade, which makes data-storage network switches, said it would pay $18.50 cash plus 0.0907 Brocade share for each Foundry share, valuing the company at $19.25 per share, or a 41 percent premium over Foundry’s Monday closing price of $13.66.

Brocade would raise $1.5 billion in debt and pay $1.4 billion in cash and the rest in equity, it said.

In after-hours trade, Brocade shares fell 16 pct to $7 while Foundry shares rose 33 pct to $18.15.

Brocade said the deal, expected to close in the fourth quarter of calendar 2008, was more about growth than cost savings, and that it would help them offer a broader range of networking technologies to support increasing Web traffic.

Both companies compete with much larger Cisco Systems Inc (CSCO.O), which offers a wide range of routing, switching and other networking equipment.

“I think customers want more integrated solutions,” said Tom Buiocchi, Brocade’s vice president of worldwide marketing.

The company said it expects the deal to add to its non-GAAP earnings in its fiscal year 2009. (Reporting by Ritsuko Ando, editing by Phil Berlowitz and Carol Bishopric)

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