December 17, 2008, 4:22 PM — Foundry Networks shareholders have approved a merger with Brocade Communications, overcoming what appears to be the last major hurdle in a deal that had been questioned as stock and credit markets plunged.
Brocade announced in July it would buy Foundry for about US$3 billion, a deal that would bring a scrappy vendor of enterprise LAN gear into one of the major suppliers of data-center network gear. In early October, as stock markets plummeted and credit tightened up, Brocade succeeded in getting a $1.1 billion term loan facility and $125 million revolving credit facility for the deal from a group of banks.
But in late October, Foundry reported a fall in third-quarter profit, blaming costs associated with the proposed merger. The Foundry shareholders' vote on the deal was delayed more than once, while Foundry's stock fell sharply. In late October, Brocade said it had lowered its bid from the original $19.25 per share to about $16.50 per share, or $2.6 billion. The amended deal also included the sale of Foundry's auction-rate securities, which took place Tuesday for an estimated $38.8 million.
On Wednesday, a majority of Foundry shareholders voted in favor of the merger, the companies said in a press release. Brocade said that the proceeds from its loan, plus cash on hand at both companies and other funds, are enough to finance the deal. Brocade expects the deal to close Thursday.