WAN optimization specialist Blue Coat is to lay down a hefty $268m to purchase its rival, Packeteer.

The proposed deal comes after Packeteer rejected an unsolicited bid from hedge fund firm Elliott Associates LP in early March to purchase the company for $200.6m. Elliott owns about 9.8 per cent of Packeteer, and said it made the offer because it was unhappy with the management team's failure to generate a profit.

Blue Coat is eager for both the additional technology gains and market penetration Packeteer may provide. The company currently ranks number three behind Cisco and Riverbed in the WAN optimization game.

"Given the size of our respective global organizations and the complementary nature of our businesses, we will achieve substantial cost reductions and significant economies of scale almost immediately," said NeSmith in a statement.

The $268m purchase will be funded through Blue Coat's available cash and an $80m convertible notes financing. The deal is expected to close in the second quarter of 2008. ®

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