Silver Lake-backed Avago agrees $37b Broadcom deal
Avago Technologies, a Singapore-incorporated chip maker backed by Silver Lake Partners, has agreed to buy its NASDAQ-listed rival Broadcom Corp. for $37 billion in cash and stock.
The deal comprises $17 billion in cash and about $20 billion in Avago shares. The newly formed Singapore holding company will be called Broadcom Limited and will be led by Avago CEO Hock Tan. Avago, which is headquartered in California, intends to finance the cash portion of the deal by using funds from the combined company and new debt of $9 billion.
In total, Broadcom Corp. shareholders will get a 32% stake in the combined entity, which Avago claims will have an enterprise value of $77 billion and combined annual revenues of about $15 billion.
Avago, which started life as started life as the semiconductor products division of HP and later Agilent Technologies, specializes in the design, development and global supply of a range of analog semiconductor devices. Broadcom, meanwhile, provides semiconductor solutions for wired and wireless communications.
The deal comes 18 months after Silver Lake invested $1 billion in the company to help fund its $6.6 billion acquisition of LSI Corporation. Silver Lake had previously acquired Avago alongside KKR, GIC Private and Temasek Holdings in late 2005 in a deal worth $2.66 billion. The company then went public in 2009 in a $650 million IPO. Silver Lake, which exited the last of its stake to an undisclosed investor last year, generated a 5x money multiple from the investment.
"The combination of Avago andBroadcom creates a global diversified leader in wired and wireless communication semiconductors," said Tan in a statement. "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."
Shares in Broadcom closed down 1.6% at $56.25 on Thursday, after surging 21.4% on Wednesday following reports that the two parties were in advanced talks. Avago - which is listed on the same bourse - closed up slightly at $142.38, having gained 7.8% the previous day.
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