1 June 2015

Avago to acquire Broadcom for $37bn

Avago Technologies Ltd of San Jose, CA, USA and Singapore (a designer and supplier of III-V-based analog components as well as digital and mixed-signal CMOS-based devices for communications, industrial and consumer applications) has entered into a definitive agreement to acquire Broadcom Corp of Irvine, CA, USA (which provides semiconductor solutions for wired and wireless communications) in a cash and stock transaction

Avago will pay $37bn, consisting of $17bn in cash plus the equivalent of about 140 million Avago ordinary shares worth $20bn (as of 27 May), resulting in Broadcom shareholders owning about 32% of the combined firm. Avago intends to fund the $17bn cash consideration with cash on hand from the combined companies plus $9bn in new, fully committed debt financing from a consortium of banks. The transaction values the combined firm at $77bn. Collective annual revenues should be about $15bn. The transaction is expected to be immediately accretive to non-GAAP earnings per share (EPS) and free cash flow, while $750m of projected annual cost synergies are expected to be achieved within 18 months.

The announcement marks "the combination of the unparalleled engineering prowess of Broadcom with Avago's heritage of technology from HP, AT&T and LSI Logic," comments Avago's president & CEO Hock Tan.  "The combination of Avago and Broadcom creates a global diversified leader in wired and wireless communication semiconductors," he adds. "Avago has established a strong track record of successfully integrating companies onto its platform. Together with Broadcom, we intend to bring the combined company to a level of profitability consistent with Avago's long-term target model," Tan continues. 

"Our customers will gain access to a greater breadth of technology and product capability," says Broadcom's president & CEO Scott McGregor. "For our shareholders, the transaction provides both compelling up-front value as well as the opportunity to participate in the future upside of the combined business," he adds. 

"When Henry Nicholas and I founded Broadcom, we had a vision of creating the world leader in communications semiconductors. Today's announcement is a continuation of that vision," comments Dr Henry Samueli, co-founder, chief technical officer & chairman of the board at Broadcom.

"In Avago, we have found a culture and a management team that embody the best of the philosophies on which Broadcom was founded, together with a fast-paced, no-nonsense, process-driven business culture that we need to take our combined company to the next level," believes Broadcom's co-founder & former CEO Dr. Henry T. Nicholas. 

Following completion of the transaction, Tan will continue as president & CEO of the combined company, which will adopt the name Broadcom Ltd. Samueli will join the board, as will another director from Broadcom. In addition, Samueli will be appointed chief technology officer. Nicholas will serve in a strategic advisory role within the firm, reporting to Tan.

The transaction has been unanimously approved by the boards of directors of both companies, as well as a special committee of the independent directors of Broadcom. Samueli and Nicholas have signed support agreements to vote to approve the transaction. Closing of the transaction is expected by the end of first-quarter 2016, and is subject to regulatory approvals in various jurisdictions, as well as the approval of the shareholders of Avago and Broadcom.

See related items:

Avago to acquire CyOptics for $400m

Tags: Avago Broadcom

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