Broadcom Inc. | $AVGO Stock | Chipmaker Acquires CA Technologies for $18.9 Billion

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Broadcom Inc. (NASDAQ: AVGO)


Broadcom, Inc. has reached an agreement to buy software maker CA Technologies for $18.9 billion in cash. Under the terms of the deal, the chipmaker will pay $44.50 per share in cash to acquire CA.

The offer represents a premium of 20% for shareholders of CA Technologies, based on the $37.21 closing price of CA stock Wednesday, according to The Wall Street Journal.

Shares of Broadcom dipped 8.2% in premarket trading Thursday after news of the deal reached investors.

In the final minutes of trading on Wednesday, AVGO stock hit $243.44, a drop of 5% in the last twelve months. Meanwhile, CA shares were up 18.6% before the opening bell in New York.

Analysts believe the acquisition suggests Broadcom is ready to diversify its business. Software tools made by CA Technologies are used in cloud computing and distributed computing environments.

The deal comes only a few months after Broadcom was blocked from acquiring rival chipmaker, Qualcomm, Inc by the Trump administration.

The government blocked the $117 billion transaction citing national security concerns. The Broadcom-Qualcomm merger would have been the largest-ever acquisition in the tech industry.  

Broadcom and CA expect to close their deal by the end of calendar 2018. However, it is still subject to various customary closing conditions, including shareholder and regulatory approval. –WSJ

Broadcom CEO Comments

Broadcom chief executive Hock Tan issued a statement saying, “This transaction represents an important building block as we create one of the world’s leading infrastructure technology companies. With its sizable 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.

Broadcom, Inc. Company Profile

Broadcom is engaged in the design, development, and supply of various semiconductor devices. The company focusses on analog III-V based devices, and sophisticated digital and mixed signal complementary metal oxide semiconductor based products internationally.

Its segments of operation are: Wireless Communications, Wired Infrastructure, Industrial & Other, and Enterprise Storage.

The Wireless Communications division provides RF front end modules, power amplifiers, and filters; custom touch controllers, Wi-Fi, global navigation satellite system (SoCs)/global positioning system, and Bluetooth.

The Wired Infrastructure segment offers cable, set-top box system-on-chips; digital subscriber line, Ethernet routing and switching application products; and consumer premise equipment/passive optical networking central office.

This segment also offers embedded controllers and processors; deserializer/serializer application specific integrated circuits; and fiber optic laser components.

The Enterprise Storage category offers peripheral component interconnect express switches; preamplifiers, redundant array of independent disks adapters and controllers; serial attached small computer system interface, read channel based SoCs, and fiber channel host bus adapters.

The Industrial & Other division provides motion control subsystems and encoders, optocouplers, light emitting diodes, and industrial fiber optics.

Broadcom products are used in a wide range of applications, such as data center and enterprise networking, broadband access, home connectivity, set-top boxes, telecommunication equipment, base stations, smartphones, storage systems, electronic displays, factory automation, alternative energy systems, and power generation systems.

Some of its competitors include Intel Corporation, Qualcomm, Inc., Cavium, Inc., Lumentum Operations LLC, and Analog Devices, Inc. The headquarters of Broadcom, Inc. are located in San Jose, California. –Reuters