Recapping the long and bumpy road leading to the Brocade - Foundry Networks merger

The most successful rock and roll instrumentalist of all time - Duane Eddy, had a 1959 top ten hit song titled - Forty Miles Of Bad Road (a genuine personal favorite of mine which peaked at #9), and today it could very well be the "theme song" for the long and rough road to the finish line that has become "di rigeur" for the Brocade - Foundry merger. Below is a recap of the long and bumpy road leading up to the Brocade - Foundry merger:
Jul. 21, 2008: Storage networking company Brocade Communications Systems announces that it has agreed to acquire enterprise LAN vendor Foundry Networks for approximately $3 billion.
Oct. 7, 2008 Brocade announces arranging secured credit with its lenders that will provide a $1.1 billion term loan facility and a $125 million revolving credit facility. The proceeds from the term loan facility are expected to be used to finance a portion of Brocade’s acquisition of Foundry Networks. In addition to using the term loan facility proceeds, Brocade anticipates raising up to $400 million in additional financing as well as using cash on hand (at both companies) and limited proceeds from a portion of the revolving credit facility to fund the Foundry acquisition.
Oct. 15, 2008: Brocade announces that in connection with its proposed acquisition of Foundry Networks, it intends to offer, pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, an unregistered offering of $400,000,000 aggregate principal amount of Senior Notes due 2014.
Oct. 24, 2008: Foundry earlier in the week reported a 35% drop in third quarter profits, Foundry Networks stock closed down over 25% after the company said it was postponing a shareholder vote on its merger with Brocade until October 29th.
Oct. 29, 2008: To permit Foundry and Brocade the opportunity to finalize merger documentation, Foundry announced that its special meeting of shareholders is further adjourned until Friday November 7, 2008 at 4:00PM PST.
Nov. 3, 2008: Foundry announces that if a definitive agreement is reached between Foundry and Brocade regarding the new agreement in principle, the stockholder meeting scheduled for Friday, November 7, 2008 at 4:00pm PST will be further delayed and additional information regarding the restructured transaction will be distributed to Foundry’s stockholders for their consideration. In that event, it is anticipated that the Foundry stockholder meeting to consider the restructured transaction would be convened in December 2008, with a closing of the transaction in the second half of December 2008.
Nov. 7, 2008: Brocade, Foundry and Merger Sub entered into an amendment to the merger agreement revising the terms of the merger consideration. Prior to the amendment, each outstanding share of Foundry common stock was to be converted into the right to receive a combination of $18.50 in cash, without interest, and 0.0907 of a share of Brocade common stock, par value $0.001 per share, subject to adjustment for stock splits, stock dividends and similar events. Pursuant to the amendment, each outstanding share of Foundry common stock will be converted into a right to receive $16.50 in cash, without any stock consideration, and will not be entitled to receive any shares of Brocade common stock.
Nov. 14, 2008: Foundry announces that the special meeting of Foundry stockholders has been rescheduled, and will now take place on December 17, 2008.
Nov. 21, 2008: Foundry's ability to seek and/or entertain competitive buyout proposals expires.
Dec. 16, 2008: Foundry Networks announced it completed the sale of its portfolio of auction rate securities in order to pay Foundry shareholders a special merger-related dividend. Based on estimated net proceeds of $38.8 million from the sale, Foundry anticipates that the special cash dividend payable to Foundry stockholders of record immediately prior to the completion of the merger between Foundry and Falcon Acquisition Sub Inc. (a wholly owned subsidiary of Brocade) will be approximately $0.249 per share of Foundry common stock.
Dec. 17, 2008: Brocade announces that Foundry Networks shareholders held a special meeting in order to give Foundry shareholders the opportunity to vote yes or no in regard to allowing Foundry to merge with Brocade, and it was at this special meeting that Foundry shareholders finally voted to approve the merger with Brocade.
Dec. 19, 2008: Brocade announces the consummation of its merger with Foundry Networks.
Also on Dec. 19, 2008, former Cisco Vice President of Engineering - Marc Randall, was named Brocade Senior Vice President of Products and Offerings:
"The three key success factors for the next 12 months are the integration of Foundry, as measured by employee retention, market share growth, and increased revenue," said Marc Randall - Brocade Senior Vice President of Products and Offerings. "The second element is broadening the Brocade brand. Our goal is to ensure that 'Brocade' and 'networking leadership' are one in the same. The third element is partnering. We have to build a very strong partner program. If we have those three elements in the next 12 months, we will clearly be on the way to huge successes."

Marc Randall discusses his new role and his outlook for Brocade in the video below.

Furthermore on Dec. 19, 2008, Founder and former CEO of Palo Alto Networks - Dave Stevens, was named Brocade Chief Technology Officer:
"With these two companies together, you will see us implement best practices from every area of the network infrastructure, from service providers to campus LANs to the data center," said Dave Stevens - Brocade Chief Technology Officer. "The result will be combined technologies that leverage everything from switching architectures and ASICS to command line interfaces, routing code, and operating system services. The objective is to develop a family of converged infrastructure solutions that enable our customers to experience a consistent level of performance, quality, network services, and management interfaces from end to end."

Dave Stevens discusses his role as well as his outlook for Brocade in the video below.

According to Brocade, the following are some of the reasons why it believed the Foundry merger was worth completing: 1. Customers are asking for more choices in vendors and for more integrated and complete solutions that address their needs. For the most demanding, data-intensive of these organizations, Brocade has strengthened its position as a proven, high-performance networking leader that optimizes information connectivity through this deal. 2. Positions Brocade as the only clear alternative to Cisco – with a complete networking portfolio and superior products, differentiated technology, and a stronger presence in the data center. 3. Strongly differentiates Brocade from Juniper (little enterprise and no data center) and other niche players. 4. Puts Brocade in the best position to capitalize on emerging market trends and convergence (e.g. Brocade will now have significant expertise in Ethernet and FC, and on both sides of the server). 5. Significantly increases Brocade's strength and diversifies its total addressable markets:

Critical Mass for Brocade – Combined company now over $2B in revenues, over 3,500 employees worldwide including a combined sales force of 1,000 able to service Global 1,000 accounts.
Technology – Brocade is the leader in storage networking and services, Foundry is a leader high-performance Ethernet/IP networking.
Customer Footprint – Both sides of the server, both sides of the firewall.
Verticals – Foundry brings strong government, education to diversify financial services and other strengths from Brocade.
Routes to Market – Brocade predominantly OEM; Foundry predominantly direct – touch/reseller - great opportunities to leverage.
Geography – Brocade over 50% from international, Foundry over 60% domestic.

In the video below shot on Dec. 19, 2008, Brocade CEO Mike Klayko speaks about the acquisition of Foundry Networks.

Related stories: Foundry joins Brocade without founder Johnson Foundry stockholders OK merger with Brocade


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