Broadcom, based in Irvine, Calif., said the acquisition will help it to integrate greater security and encryption features into its chips. BlueSteel is based in Mountain View, Calif.
"This is a powerful combination that brings Broadcom's broadband communications expertise together with BlueSteel's leadership in high-speed network security processors," said Dr. Henry Nicholas III, Broadcom's CEO, in a statement.
Under the terms of the agreement, Broadcom will issue about 375,000 shares of its Class B Common Stock in exchange for all outstanding shares of BlueSteel Preferred and Common Stock and upon exercise of BlueSteel employee stock options and other rights.
The merger transaction is expected to close within 60 days and will be accounted for as a pooling of interests. The boards of directors of both companies have approved the agreement but the deal is still subject to the approval of BlueSteel shareholders. The transaction also has to meet regulatory requirements and other customary closing conditions. Broadcom expects to record a one-time charge in its first fiscal quarter to cover related expenses.
The companies said that BlueSteel's technology is key to the development of a secure Internet infrastructure for Voice over Internet Protocol (VoIP), e-commerce transactions, and corporate internetworking and telecommuting.
As the Internet matures into a necessary choice for commercial transactions, traditional infrastructure equipment including routers, gateways, firewalls, modems, LAN adapters and other Internet appliances, will increasingly requiring robust security as a standard product feature.