The News Bee

Chipmaker Avago buying rival Broadcom for $37B

Chipmaker Avago buying rival Broadcom for $37B

Chipmaker Avago Technologies Thursday announced plans to buy rival Broadcom in a $37 billion cash and stock deal marking the latest consolidation of firms that supply parts for smartphones and other tech products. The deal, one of the largest tech acquisitions in history, values the combined companies at $77 billion in enterprise value. Avago and Broadcom predicted the combined firm would have “the most diversified communications platform in the semiconductor industry, with combined annual revenues of approximately $15 billion.”


This deal could mark the start of a new string of megamergers in the tech industry, says Christopher Rolland, an analyst with investment bank firm FBR & Co. “We have seen a slowdown in top buying growth rates. So one of your options to at least generate growth on the bottom line is to do accretive deals,” he said. “There is actually very little strategic overlap between the two companies. What they will get out of it is size.” The deal terms call for Singapore-headquartered Avago to pay $17 billion in cash and the economic equivalent of 140 million of the company’s shares, valued at $20 billion as of Wednesday, to acquire California-based Broadcom.

As a result, Broadcom shareholders are projected to own 32% of the combined company. For each of their current Broadcom shares, they will have the option to receive either $54.50 in cash, 0.4378 ordinary shares in a newly formed Singapore holding company, a restricted security equivalent to 0.4378 shares of the holding company or a combination of the three options. Avago said it plans to fund the deal with a combination of cash on hand and $9 billion in new debt.

Avago shares were up 7.76% at $141.49 in pre-market trading after the deal was announced. Shares of California-based Broadcom were down fractionally at $56.71. However, the company’s stock had rocketed Wednesday, closing up 21.45% at $57.15, amid heavy trading sparked by market rumors and a report by The Wall Street Journal that the acquisition could be imminent. Hock Tan, president and CEO of Broadcom, will keep both those roles in the combined company, which will be known as Broadcom Limited. Henry Samueli, Broadcom’s co-founder, board chairman and chief technology officer, will join the board of the new company and serve as its chief technology officer.


February 2018
« Jan