Avago to buy Broadcom for $37 billion in biggest-ever chip deal

Thu May 28, 2015 5:40pm EDT
 
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By Liana B. Baker and Supantha Mukherjee

(Reuters) - Avago Technologies Ltd (AVGO.O: Quote) agreed on Thursday to buy Broadcom Corp BRCM.O for $37 billion in the largest merger of chipmakers ever, turning a lesser known company run by a ferocious dealmaker into one of the biggest industry players.

Avago, which serves the wireless and industrial markets, is offering Broadcom shareholders $17 billion in cash and Avago shares valued at $20 billion.

Broadcom is best known for its connectivity chips, which are used widely in smartphones made by Apple Inc (AAPL.O: Quote) and Samsung Electronics Co Ltd (005930.KS: Quote).

The deal is the biggest so far by Avago Chief Executive Hock Tan, who has developed a small chipmaker into a $36 billion company through acquisitions since taking the helm nine years ago.

Tan, a serial deal-maker, has trimmed Avago's portfolio by divesting units while bulking up in faster-growing areas.

The combined company, to be based in Singapore and known as Broadcom, will be the third-largest U.S. semiconductor maker by revenue, behind Intel Corp (INTC.O: Quote) and Qualcomm Inc (QCOM.O: Quote). The merger is the industry's second megadeal this year and is unlikely to be the last, analysts said.

The $37 billion price represents a premium of about 28 percent over Broadcom's market value of $28.85 billion as of Tuesday's close, before the Wall Street Journal reported that the companies were in talks.

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A man passes Broadcom's Asia operations headquarters office at an industrial park in Singapore September 16, 2014.   REUTERS/Edgar Su