UPDATED 22:03 EST / OCTOBER 03 2017

INFRA

Broadcom’s $5.5B deal to buy Brocade is delayed again

Broadcom Ltd.’s proposed $5.5 billion acquisition of network equipment maker Brocade Communications Systems Inc. has been pushed back amid regulatory review hurdles.

Semiconductor maker Broadcom announced its intention to acquire Brocade back in November, but the deal has been repeatedly delayed due to regulator concerns that it might be anticompetitive. The original acquisition agreement gave both companies the option to terminate the deal if it wasn’t completed by Nov. 1.

Now, according to a report in the Wall Street Journal Tuesday, the deadline has been extended until Nov. 30.

The slow-moving acquisition has already overcome several regulatory issues. Earlier this year, it was pushed back pending a review by the U.S. Federal Trade Commission, which said the deal could be anticompetitive because Broadcom might take advantage of its position as a component supplier to skew prices on network switches, a market dominated by Brocade and its main rival Cisco Systems Inc. The FTC later approved the deal with certain conditions, which included Broadcom promising that it would not use its position to harm Cisco.

China, an important market for both companies, has also approved the deal after some scrutiny.

However, the acquisition has once again been held back pending a review by the Committee on Foreign Investment in the United States, the body tasked with studying the national security implications of any foreign investments in U.S. companies. That agency is said to be concerned because Broadcom is headquartered in Singapore, though the companies expressed confidence they will soon get the go-ahead to seal their merger.

Because of the delay, Brocade announced that it will complete the sale of its data center networking business to San Jose company Extreme Networks Inc. within the next 30 days. That deal, worth $55 million, was originally slated to be completed once the Broadcom-Brocade merger was done and dusted, but now the companies say they’re pressing ahead anyway.

Under the deal, which was announced in March, Extreme Networks will acquire Brocade’s VDX, MLX and SLX switches, as well as software products such as its Virtual Application Delivery Controller, Virtual Router and SDN Controller packages. Extreme Networks said it hoped to generate over $230 million in annualized revenue in 2018 from the deal. Extreme Network’s share price promptly jumped by 7 percent to $12.95 following the announcement.

Image: Brocade/Facebook

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