Broadcom, Brocade Push Back Merger Deadline

The Wall Street Journal

Deal being delayed by a continuing U.S. investment panel review

The deal between Broadcom and Brocade stands to help Broadcom reduce its reliance on sales of wireless chips for smartphones.
The deal between Broadcom and Brocade stands to help Broadcom reduce its reliance on sales of wireless chips for smartphones.PHOTO: MIKE BLAKE/REUTERS
Broadcom Ltd. AVGO +0.67% and Brocade Communication Systems Inc., BRCD +0.41%technology companies that have been trying to complete a $5.5 billion tie-up since last year, have agreed to push back the deal-closing deadline to allow for additional regulatory review.
Under the original merger agreement, the companies could walk away from the deal on Nov. 1 if it hadn’t closed. But the transaction has been delayed due to a review by the Committee on Foreign Investment in the United States, or CFIUS, a government agency tasked with screening foreign investments for national-security concerns.
The companies said Tuesday documents have been refiled with CFIUS to review the deal, adding that the transaction could close by Nov. 30 with committee approval.
Broadcom, which is domiciled in Singapore and headquartered in San Jose, Calif., operated as Avago Technologies Ltd. until February 2016, when it completed a $37 billion purchase of Broadcom Corp. Avago was the acquisitive former semiconductor unit ofHewlett-Packard Co. and made chips for wireless-communications and corporate data-storage markets.
“Broadcom and Brocade have been and will continue to be actively engaged with CFIUS, remain fully committed to the merger and will continue to work diligently and cooperatively to close the merger,” the companies said Tuesday. A Brocade spokesman said the long review isn’t atypical and is due partly to the complexity of the transaction and the sensitivity of the technology it produces. A Broadcom spokesman declined to comment further.
Shares in Broadcom slipped 0.3% to $239.39 in Tuesday trading, while Brocade traded up 1% to $12.15.
The U.S. has toughened its scrutiny of certain foreign deals, with Washington growing increasingly more concerned with transactions involving Chinese companies beginning in the Obama administration. Several deals involving Chinese companies earlier this year were forced to refile their petitions after failing to get approval within the roughly two-and-a-half month review period.
Last year, Broadcom agreed to buy Brocade for $5.5 billion, aiming to expand beyond its main business in chips to add boxes that help connect storage systems to computers in data centers.
Broadcom, one of Silicon Valley’s most aggressive acquirers, said it planned to sell Brocade’s other communications-technology businesses to avoid competing with companies that now buy Broadcom chips.
The sale of Brocade’s networking unit to Arris International PLC for about $1 billion is one such divestiture. In a separate statement Tuesday, Arris said it remains committed to its pending acquisition.
On Tuesday, Extreme Networks Inc. announced a revised deal with Brocade, planning to acquire Brocade’s data-center switching, routing and analytics business before the Broadcom purchase closes.
The deal between Broadcom and Brocade stands to help Broadcom reduce its reliance on sales of wireless chips for smartphones, a market that has slowed. Apple Inc. is Broadcom’s largest customer.
Write to Ezequiel Minaya at ezequiel.minaya@wsj.com