Image source: Ruckus Wireless.

What: Shares of Ruckus Wireless (NYSE:RKUS) climbed more than 30% early Monday after the company announced a definitive agreement to be acquired by Brocade (NASDAQ:BRCD).

So what: Per the terms of the agreement, Ruckus investors will receive $6.45 in cash and 0.75 shares of Brocade common stock for each Ruckus share they own. Based on Friday's closing price, that valued Ruckus at $1.5 billion, or $14.43 per share -- a more than 44% premium to Friday's close. Net of cash acquired, the total transaction is valued at roughly $1.2 billion.

"The combination of our two companies will create an exciting new thought leader in networking and significant opportunities for our stakeholders to participate in the combined company's future growth potential," added Rucks CEO Selina Lo. "We operate in adjacent segments of the larger networking market with a number of common customers for our complementary products, and have a successful track record of working together."

Now what: The transaction has been approved by both companies' boards of directors, and is expected to close in Brocade's 2016 fiscal third quarter. But Ruckus investors should also keep in mind the acquisition is still subject to regulatory approval and the tender of a majority of Ruckus' outstanding shares by Brocade. And the cash portion of Brocade's purchase price is expected to be funded through a combination of cash on hand and new bank term loan financing. It's a big pill to swallow for Brocade, whose entire market capitalization sits just above $3.6 billion after falling more than 15% on the news this morning. 

So with shares of Ruckus now trading just pennies below the acquisition price given Brocade's decline -- and with the caveat that the acquisition might well position the combined company for long-term success -- I think Ruckus shareholders would be wise to take at least some of their chips off the table today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.