Avago to buy Broadcom for $37 billion
Avago Technologies, a developer of analogue semiconductor devices with a focus on III-V based products and mixed signal chips, is acquiring the communication chip company Broadcom. The cash and stock transaction values the combined company at $77 billion. On completion of the acquisition, the combined annual revenues will be of approximately $15 billion.
Under the terms of the agreement, Avago will acquire Broadcom for $17 billion in cash consideration and the economic equivalent of approximately 140 million Avago ordinary shares, valued at $20 billion as of May 27, 2015, resulting in Broadcom shareholders owning approximately 32 percent of the combined company. Based on Avago's closing share price as of May 27, 2015, the implied value of the total transaction consideration for Broadcom is $37 billion.
Avago intends to fund the $17 billion of cash consideration with cash on hand from the combined companies and $9 billion in new, fully-committed debt financing from a consortium of banks.
"Today's announcement marks the combination of the unparalleled engineering prowess of Broadcom with Avago's heritage of technology from HP, AT&T, and LSI Logic, in a landmark transaction for the semiconductor industry," said Hock Tan, president and COE of Avago.
"The combination of Avago and Broadcom creates a global diversified leader in wired and wireless communication semiconductors. 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."
"This transaction benefits all of Broadcom's key stakeholders," remarked Scott McGregor, president and CEO of Broadcom. "Our customers will gain access to a greater breadth of technology and product capability. 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."
"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 and we could not think of a better partner for the future than Avago," stated Henry Samueli, co-founder, CTO and chairman of the board of Broadcom.
Following completion of the transaction, Hock Tan will continue to serve as president and CEO of the combined company, which will adopt the name Broadcom Ltd. Henry Samueli will join the board of the combined company as will another director from Broadcom. In addition, Samueli will be appointed CTO of the combined company. Henry Nicholas will serve in a strategic advisory role within the combined company.
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.
Closing of the transaction is expected by the end of the first calendar quarter of 2016, and is subject to regulatory approvals in various jurisdictions, as well as the approval of Avago's and Broadcom's shareholders.
