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Foundry delays vote on Brocade deal

Foundry Networks today abruptly postponed its shareholders vote on its pending acquisition by Brocade, raising questions about whether the $3 billion deal will go through.

Brocade said on July 21 it would buy Ethernet switch vendor Foundry to expand its data center presence. Foundry shareholders were scheduled to vote on the deal today, but the company issued a press release saying the meeting was pushed back to next Wednesday because of “recent developments related to the transaction.”

Foundry did not say what those developments were, and Brocade spokesman John Noh said he could not comment. In a note to his clients, financial analyst Aaron Rakers of Wachovia Capital Markets wrote that Foundry investors are worried that Brocade either hasn’t been able to raise the $400 million in funding to go with the $1.1 billion loan it secured two weeks ago, or is trying to renegotiate terms of the deal.

“It is very hard for us to judge the outcome at this point, but we do believe Brocade has been very committed to the transaction and we believe investors could have meaningful questions on Brocade’s long-term growth story without this acquisition,” Rakers wrote.

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