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21 August 2009


Avago’s IPO underwriters exercise over-allotment option in full

After filing a registration statement with the US Securities and Exchange Commission (SEC) on 5 August, San Jose- & Singapore-based Avago Technologies Ltd (which designs and supplies analog semiconductor devices for communications, industrial and consumer applications, focusing on III-V based products) has closed its initial public offering of 43,200,000 ordinary shares (an increase of 20% from the 36,000,000 shares originally offered). At a price to the public of $15 per share, this totals $648m, making it the second largest IPO in the USA so far in 2009.

Now, in addition, after full exercising their 30-day over-allotment option, the underwriters have purchased an additional 6,480,000 ordinary shares from selling shareholders. Of the total of 49,680,000 ordinary shares sold, 21,500,000 were sold by Avago and 28,180,000 by selling shareholders. Avago did not receive any additional proceeds from the exercise of the underwriters’ over-allotment option, other than the proceeds from the exercise of options held by certain selling shareholders, which are not material.

Avago began as part of Hewlett-Packard in 1961. In 1999 it became the semiconductor products group of spin-off Agilent Technologies Inc of Santa Clara, CA. In December 2005 it was acquired for $2.66bn in a leveraged buy-out by private-equity firms Kohlberg Kravis Roberts and Co (KKR) and Silver Lake Partners, with a combined stake of 80.9%. Other shareholders included Seletar Investments (10.6%) and Geyser Investment (7.1%). The firm was subsequently renamed Avago. To reduce debt related to the buy-out, Avago later sold off several units, including its printer ASIC chip division to Marvell Technology Group Ltd in 2006 for $275m and its storage chip division to PMC-Sierra Inc in 2007 for $425m.

The IPO’s net proceeds to Avago will be used to pay equity sponsors and repay debt. For the six months ended 3 May, Avago’s net revenue was $693m, down 15% $813m year on year. However, the total cost of products sold (which includes amortization of manufacturing-related intangible assets and restructuring charges) was cut by 9% from $497m to $452m, R&D expenses were cut by 5% from $128m to $121m, and selling, general & administrative expense were cut by 16% from $98m to $82m. As of May 3, Avago had about 3400 staff worldwide (about 57% in Asia, 33% in the USA and 10% in Europe), with locations including two design centers in the USA, four in Asia and three in Europe.

See related item:

Avago prepares $400m IPO on NASDAQ

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