Brocade Communications Systems Inc. said on Tuesday it would buy rival McData Corp. in a $713 million stock deal, bolstering its line of data storage networks to compete against Cisco Systems Inc.
Both companies sell equipment that boosts the efficiency of corporate communications networks used for data storage.
Brocade is best known for mid-range products known as data switches, while McData's market share is strongest in directors, or high-end data switches.
We believe this combination is a win for our customers and our investors, said John Kelley, McDATA chairman, president and CEO.
Under the deal, McData stockholders will receive 0.75 shares of Brocade common stock for each share of McData class A common stock and each share of McData class B common stock.
Based on Monday's closing prices, that is equal to about $4.61 a share, or a 48 percent premium to McData's class A share price. The deal is expected to close as early as Brocade's 2007 fiscal first quarter, which ends in January 2007.
The companies said their merger will allow them to reduce combined expenses by about $100 million on an annualized basis, giving them more resources to invest in research and development on new technologies and products.