Brocade's Foundry buy rescued by £600 million loan
But others take a hell of a beating.
By Stephen Lawson, IDG News Service | Published: 14:45, 08 October 2008
Brocade has secured a $1.1 billion (£600 million) loan to fund its acquisition of Foundry Networks despite a tightening of credit markets.
The loan came through even as the Dow Jones fell more than 500 points (5.11 percent), and many technology stocks dropped even more steeply.
Among those hardest hit were Sun, Nortel, Amazon, and Qwest Communications International, all down more than 10 percent. Apple shares went down 9.25 percent while Google suffered less damage, falling 6.79 percent. As they did in the bloodbath last Monday, most major tech stocks, including Microsoft and Cisco Systems, outpaced the Dow in their journey down on Tuesday.
Brocade's planned acquisition of Foundry, announced in July, will expand the storage-area-networking pioneer into the Ethernet LAN business for an end-to-end set of offerings. Brocade said in July it would exchange a combination of stock and cash for each Foundry share, partially funding the deal with about $1.5 billion of debt financing from Bank of America and Morgan Stanley.
Such arrangements are common, but by the time Brocade held an analyst meeting in mid-September to lay out its plans for Foundry, Wall Street investment banks were already teetering and stocks were on their way down. Financial analysts at the event repeatedly asked Brocade CEO Michael Klayko about the financing of the deal, and he said each time that he was confident it would come through.
Brocade said on Tuesday that it had got a $1.1 billion term loan facility and a $125 million revolving credit facility. Bank of America led the funding, joined by Banc of America Securities, Morgan Stanley Senior Funding and other institutions. Brocade also said it expects to raise as much as $400 million in additional financing. Brocade stuck by its forecast that the acquisition would be completed by year's end.
