Avago Technologies Ltd., a Singapore-based maker of semiconductors, decided to buy wireless chipmaker Broadcom Corp. for US$37 billion within the industry\’s biggest acquisition ever.
Avago will pay US$17 billion of money and US$20 billion in stock in the transaction, the companies said in a statement. The sale values Broadcom at US$54.50 per be part of cash, in contrast to its closing cost of US$57.16 on Wednesday, if this rose probably the most since 2001 after reports that the deal was imminent.
The purchase of Broadcom creates the world\’s sixth-largest chipmaker by revenue and it is the latest inside a round of consolidation in the US$300 billion industry because the rising costs of production and design push manufacturers to mix. Singapore-based Avago has been at the forefront of that wave with several acquisitions, including its US$5.6 billion acquisition of LSI Corp. at the end of 2013. The flood of deals may be reaching its peak.
I\’ve got my misgivings, this feels very frothy for me
\”I\’ve experienced my misgivings, this feels very frothy for me,\” said Alex Gauna, an analyst at JMP Securities in Bay area. \”This seems like a stretch, enjoy it has a touch of recklessness to it. It seems like a bridge too much to me.\”
Broadcom, located in Irvine, California, represents a much bigger target for Avago. While Singapore-based Avago has a greater market value, at US$36.3 billion, Broadcom had higher sales last year, with US$8.4 billion in contrast to its potential acquirer\’s US$4.9 billion.
A deal would be almost twice the size of NXP Semiconductors NV\’s pending acquisition of Freescale Semiconductor Ltd. for around US$16.7 billion, including debt, announced in March.