Foundry postpones shareholder vote on Brocade’s offer yet again

Foundry Networks, which first postponed a shareholder vote to approve its proposed sale to Brocade Communications from last Friday to Wednesday, and then postponed it a second time to Nov. 7, has postponed it once again. Probably.

In a release today, Foundry said that should the two companies reach a new “definitive”
agreement, the shareholder vote would be “further delayed and additional information regarding the restructured transaction” distributed to shareholders “for their consideration.” How thoughtful.

In any case, Foundry shareholders aren’t likely to get anything close to the deal value first offered in July by Brocade, which offered $18.50 per share in cash plus a fractional share of Brocade that boosted the value of the total deal at the time to $19.25 per share.

The new price, tentatively agreed to Wednesday, is $16.50 a share, but its to be all in cash.

Cash is king these days, given the current credit crunch, which has also driven up borrowing costs. Brocade was evidently having problems finalizing the deal’s last piece of financing, a $400 million debt offering to supplement the $1.23 billion credit line from Bank of America.

And then there is the matter of Foundry’s auction-rate securities assets, where a number of companies parked some of their cash, thinking them as nearly as liquid as treasuries. The interest rates on the investments were re-set typically at least once a month, but the auctions for them froze up last winter and haven’t thawed much since.

Foundry’s auction-rate holding were valued at $77.1 million as of June 30, down from $82.5 million at the end of 2007. As part of the restructured deal, Foundry stockholders could get the proceeds of the sale of the company’s auction rate portfolio, up to $50 million, or about $0.33 per share, if Foundry is able to successfully liquidate it before the deal closes. That’s a big if.


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  • Gene Quermann

    As a stockholder, I voted for the original deal. But the results were never announced that I’ve been able to see. What was the result of the vote? If it was IN FAVOR of the first deal, how can Foundry Management toss that vote out?