Avago Technologies to Acquire Broadcom for $37 bn

Avago-Technologies-to-Acquire-Broadcom-for-$37-bnAvago Technologies will acquire Broadcom in a cash and stock transaction for $37 billion.

Under the terms of the agreement, Avago will acquire Broadcom for $17 bn in cash consideration and the economic equivalent of approximately 140 million Avago ordinary shares, valued at $20 bn 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 bn.

Upon completion of the acquisition, the combined company will have the most diversified communications platform in the semiconductor industry, with combined annual revenues of approximately $15 billion.

“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 chief executive officer, 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,” added Tan.

“This transaction benefits all of Broadcom’s key stakeholders,” remarked Scott McGregor, president and chief executive officer, 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,” commented McGregor.

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

Holders of outstanding shares of Broadcom will have the ability to elect to receive, for each Broadcom share held: $54.50 in cash; 0.4378 ordinary shares in a newly-formed Singapore holding company; a restricted equity security that is the economic equivalent of 0.4378 ordinary shares of HoldCo that will not be transferable or saleable for a period of one to two years after closing; or a combination thereof.

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.

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. Dr Samueli and Dr Nicholas, the founders of Broadcom, have signed support agreements to vote to approve the transaction.

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.

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