Blackstone Group LP (BX), the world’s largest private-equity firm, ended talks to buy Brocade Communications Systems Inc. (BRCD) because the price was too high for a leveraged buyout, said a person with knowledge of the situation.
Blackstone and Francisco Partners had been discussing a potential takeover of Brocade after other private-equity firms lost interest, said the person, who declined to be identified because the matter is private. The maker of switches for data- storage networks, which has been looking for a buyer since 2009, had a market value of $2.64 billion as of yesterday. The stock fell as much as 10 percent at 3:46 p.m. in New York trading.
Brocade became more expensive after its stock rebounded from an Aug. 5 drop, when the San Jose, California-based company reported preliminary revenue and profit that fell short of its forecasts. In July, Dell Inc. passed over Brocade to buy competitor Force10 Networks Inc., a person with knowledge of the situation said at the time.
Spokesmen for New York-based Blackstone and Brocade declined to comment. A representative of Francisco Partners wasn’t immediately available to comment.
Brocade had advanced 12 percent this year through yesterday. Elliott Management Corp., the hedge fund that pushed Novell Inc. to sell itself in 2010, reduced its stake in Brocade last month to 7.5 percent. At the time, Brocade had gained about 64 percent on renewed speculation about a potential sale since Elliott amassed the stake in August.
Fund managers sometimes use their status as shareholders to urge management to shift strategy or look for a buyout. Activist investor Carl Icahn pressed Motorola Mobility Holdings Inc. (MMI) on July 21 to explore strategic alternatives. Google Inc. agreed to acquire Motorola Mobility for $12.5 billion on Aug. 15.
By Serena Saitto
Courtesy of Bloomberg News