Broadcom To Buy CA Technologies For $18.9 Bn

US based semiconductor firm Broadcom has announced to acquire leading software solutions firm CA Technologies for $18.9 billion. The transaction is expected to close in the last quarter of 2018.

Broadcom said it is acquiring CA to build “one of the world’s leading infrastructure technology companies.”

This is the first major acquisition by the semiconductor firm since its ambitious bid to acquire Qualcomm for over $150 billion failed early this year.

Under the terms of the agreement, CA’s shareholders will receive $44.50 per share in cash. This represents a premium of approximately 20% to the closing price of CA common stock on July 11, 2018, and a premium of approximately 23% to the firm’s volume-weighted average price (“VWAP”) for the last 30 trading days.

“The all-cash transaction represents an equity value of approximately $18.9 billion, and an enterprise value of approximately $18.4 billion,” Broadcom said.

Hock Tan, President and Chief Executive Officer of Broadcom, said, “This transaction represents an important building block as we create one of the world’s leading infrastructure technology companies. With its sizeable installed base of customers, CA is uniquely positioned across the growing and fragmented infrastructure software market, and its mainframe and enterprise software franchises will add to our portfolio of mission critical technology businesses. We intend to continue to strengthen these franchises to meet the growing demand for infrastructure software solutions.”

The semiconductor firm will fund the transaction with cash on hand and $18.0 billion in new, fully-committed debt financing.

“We are excited to have reached this definitive agreement with Broadcom,” said Mike Gregoire, CA Technologies Chief Executive Officer. “This combination aligns our expertise in software with Broadcom’s leadership in the semiconductor industry. The benefits of this agreement extend to our shareholders who will receive a significant and immediate premium for their shares, as well as our employees who will join an organization that shares our values of innovation, collaboration and engineering excellence. We look forward to completing the transaction and ensuring a smooth transition.”

The transaction is expected to drive Broadcom’s long-term Adjusted EBITDA margins above 55% and be immediately accretive to Broadcom’s non-GAAP EPS. On a combined basis, Broadcom expects to have last twelve months non-GAAP revenues of approximately $23.9 billion and last twelve months non-GAAP Adjusted EBITDA of approximately $11.6 billion.

As a global leader in mainframe and enterprise software, CA’s solutions help organizations of all sizes develop, manage, and secure complex IT environments that increase productivity and enhance competitiveness. CA leverages its learnings and development expertise across its Mainframe and Enterprise Solutions businesses, resulting in cross enterprise, multi-platform support for customers.

The majority of CA’s largest customers transact with CA across both its Mainframe and Enterprise Solutions portfolios. CA benefits from predictable and recurring revenues with the average duration of bookings exceeding three years.

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