Broadcom buys network gear maker Brocade for $5.9 billion

The merger and acquisition frenzy that dominated October did not end when the calendar flipped to November.

Chip-maker Broadcom is the latest company to join the fray, announcing on Wednesday that it would be acquiring Brocade Communications Systems, a maker of corporate and industrial networking gear.  Broadcom will pay $5.9 billion, with the deal expected to close in the middle of next year.

As part of the deal, Broadcom — known for making wireless chips that are found in a variety of devices ranging from cell phones and laptops to TV set top boxes — will divest Brocade's IP networking business. This includes Ruckus Wireless, a maker of WiFi networking equipment, that Brocade bought earlier this year for $1.2 billion.

“This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers,” said Hock Tan, president and CEO of Broadcom, in a statement announcing the deal. "With deep expertise in mission-critical storage networking, Brocade increases our ability to address the evolving needs of our OEM customers."

Broadcom's latest purchase comes amid a flurry of deals in the chip maker space. Last year, the current Broadcom was created when chipmaker Avago bought Broadcom for $37 billion, assuming Broadcom's name and completing what was then the largest chip deal. That deal was trumped last week however, when Qualcomm agreed to buy NXP Semiconductors for $38 billion.

Broadcom will pay $12.75 per share in the all-cash transaction, valuing the deal at $5.5 billion while also taking on $400 million in Brocade's debt.

Brocade stock jumped more than 6% in pre-market trading, to $11.25 per share, and Broadcom rose 2.3% to $153.07.

Follow Eli Blumenthal on Twitter @eliblumenthal.