Anticompetitive concerns of the United States Federal Trade Commission were allayed as Broadcom Ltd. agreed to establish a firewall as part of its contract to take over Brocade Communications Systems Inc., also traded on the Nasdaq. Regulators said the $5.9 billion deal may go through as the current access to the confidential information of the target's major competitor, Cisco Systems Inc., has been tackled as a remedy in the conditions for the deal. The issue was related to competition in the market for fibre channel switches. The transaction includes $400 million in debt.
Broadcom slumped 1.41% to close at $229.76 per share, while Brocade advanced 0.4% to 12.66 per share in the shortened session in New York ahead of the Fourth of July holiday. Brocade and Cisco are the only two entities in the global sector of fibre channel switches, FTC noted. The latter is Broadcom's supplier. The acquisition has received a green light in the European Union and Japan.
"The proposed consent order prevents Broadcom from using Cisco’s competitively sensitive confidential information for any purpose other than the design, manufacturing and sale of fibre channel ASICs (application-specific integrated circuits) for Cisco. It requires Broadcom’s business group responsible for developing, producing, selling and marketing fibre channel ASICs for Cisco to have separate facilities and a separate information technology system with security protocols that allow access only to authorized individuals, and provides for other information firewall protections," the statement adds.
