A wave of mergers sweeping the semiconductor industry scored its biggest deal yet Thursday with the announcement that Avago Technologies is acquiring Broadcom in a $37 billion deal.
Avago, incorporated in Singapore with operations in the Silicon Valley, said Thursday it has reached an agreement to acquire Irvine chip maker Broadcom for $17 billion in cash and $20 billion in equity.
After the cash and stock deal is completed, Avago will rename itself Broadcom Limited, the company said in a press release.
The combination is expected to realize $750 million in synergies over the net 18 months, the announcement said
Hock Tan, president and CEO of Avago, said the deal was a landmark for the semiconductor industry.
Tan will serve as president and CEO of the combined company, which will be renamed Broadcom.
It s the second big acquisition for Avago . In May 2014, it completed the $6.6 billion acquisition of Silicon Valley chip maker LSI. Avago said in its annual report that it is moving its U.S. offices to LSI.
The Broadcom deal will give Broadcom shareholders about 32 percent of the combined company. Avago is paying $17 billion in cash and the equivalent of about 140 million in Avago shares valued at $20 billion. The cash will come from cash on hand in both companies plus $9 billion in new debt financing from a consortium of banks, the announcement said.
The deal takes place amid a two-year wave of mergers and acquisitions that is reshaping the semiconductor industry, which makes chips that power smartphones, personal computers, servers, supercomputers and the burgeoning Internet of Things.
Broadcom makes chips for wireless and mobile devices. It has a 22-year history. Avago makes analog chips for wireless and also systems on a chip. At one time Hewlett-Packard s semiconductor division, it went public in 2009. It is incorporated in Singapore but says it has co-headquarters in Silicon Valley.
The deal will create a global diversified leader in wired and wireless communication semiconductors, Avago said.
Broadcom s president and CEO Scott McGregor said the deal was compelling for shareholders.
Photo: Broadcom
