Broadcom Ltd. has agreed to buy Brocade Communications Systems Inc. to gain a foothold in the burgeoning data center network equipment market.

The deal will let Broadcom leverage Brocade's fiber channel switch portfolio to enhance data transfer speed between servers and storage devices.

Broadcom acquired Brocade in an all-cash deal, valuing the acquired company at $12.75 per share, translating to 46.7 percent premium to its Friday closing price. The deal will also include $400 million in debt. Broadcom plans to fund the deal with its existing cash balance, in addition to funds generated from a new debt offering.

The companies expect the deal to be completed by next year. Broadcom believes that Brocade's Fibre Channel Storage Area Network (SAN) Switching business to be accretive with immediate effect. Broadcom specializes in producing connectivity chips. These chips are used in various products including servers and mobiles. Brocade, on the other hand, deals with storage products, software, and network switches.

Broadcom said that it is contemplating disposing Brocade's networking business. This business unit deals with access point and controllers to deliver high-speed internet to uses. The divestment of this business will help Broadcom to consolidate its business and avoiding competition with bigger players such as Cisco Systems, which also happens to be one of its biggest clients.

The deal underlines the growing trend of consolidation in the tech sector. In a news release, Hock E. Tan, the president and CEO of Broadcom, said that the strategic acquisition would help Broadcom to boost its position in the enterprise storage connectivity solutions segment.