Avago to buy Broadcom for $37bn

Avago Technologies AVGO 630,12 +19,96 +3,27% is going to spend $37bn in acquiring rival Broadcom Unfortunately, we could not get stock quote BRCM this time.. This makes it the largest ship technology merger to date.

Avago which initially was part of HP‘s test and measurement division, which was spun out as Agilent. In October 2013, Avago bought LSI Industries for $6.6bn, followed in February 2015 by the acquisition of Emulex. They are now moving to acquire Broadcom.

Broadcom was founded in 1991 by Henry T. Nicholas and Henry Samueli, both experienced in communications ICs. In 1993 they won a contract for Scientific-Atlanta to produce a chipset for their set-top box for Time-Warner’s new cable network in Orlando, Florida. The agreement provided a three-chip set that managed the quadrature-amplitude modulation (QAM) encoding. Later integration dropped this to a single chip. In 1996, they would use the same QAM technology to support ADSL delivery. About the same time, they developed a Fast Ethernet chipset and started their development of networking. In 1998, the company went public, and since then has made many acquisitions, including in September 2013 Renesas Mobile Europe.

The terms of the deal mean Avago will spend $17bn in cash and $20bn in shares to acquire Broadcom. Broadcom shareholders will get $54.50 USD or 0.4378 shares in Boradcom Ltd (previously “HoldCo”), a new holding company that will own both Avago and Broadcom. Alternatively they can elect to have a combination of cash or shares. Avago will fund this with on-hand cash, and a futher $9bn of committed financing from banks. The original founders of Broadcom have already given their agreement for the merger.

“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.”  “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.” –  Hock Tan, President and CEO, Avago

“This transaction benefits all of Broadcom’s key stakeholders. 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.” – Scott McGregor, President and CEO, Broadcom