Avago Technologies has agreed to buy Broadcom for $37 billion in cash and stock. Although Avago’s market value is higher than Broadcom’s, Broadcom is the larger company by revenue. The California chipmaker had $8.4 billion in revenue last year, 70% more than Avago’s $4.9 billion. The combined company will be called Broadcom Limited.
Broadcom is the second U.S. chipmaker to announce a mega-merger this year. In March Freescale agreed to be acquired by NXP Semiconductor for $16.7 billion.
Broadcom is the world’s largest maker of Wi-Fi chipsets for mobile devices. The company’s chips are found in smartphones, tablets, routers, access points and gateways. Broadcom also makes digital processors for small cell base stations, and it makes chips for Ethernet controllers and TV set-top boxes. The company was in the cellular modem business for a few years, but decided last year to try to sell that business.
Broadcom never found a buyer for its modem business, but now it has found one for the entire company. Avago, based in Singapore, makes analog semiconductor devices and addresses four markets: enterprise storage, wired infrastructure, wireless communications and industrial applications. Products include RF amplifiers, LEDs, LED displays, motion-control encoder products and optical sensors.
“There are several Avago product lines that would be enhanced with Broadcom’s products,” said analyst Will Strauss of Forward Concepts. “For example, Avago is big on RF and fiber optics, but very weak on baseband technology (which Broadcom has). That would go well for C-RAN product offerings.”
This is the latest in a string of acquisitions for Avago. Last year the company bought LSI Corp. for $6.6 billion and PLX PCI Express for $309 million.
Avago was once part of Hewlett-Packard. Its history dates back to 1961, when it was called HP Associates and supplied silicon for that company’s test systems. In 1999, HP spun off Agilent Technologies as a separate test and measurement specialist, and Agilent formed a joint venture with Phillips to make Lumiled LEDs. Then in 2005, Agilent sold its part of the joint venture to Phillips, and sold its non-Lumileds LED business to private equity firms KKR and Silver Lake for $2.6 billion. KKR and Silver Lake named the company Avago and said at the time that it was the largest private chip company in the world. It did not stay private for long; Avago went public in 2009, and Silver Lake subsequently cashed out with a reported return of 400%.
The deal is expected to close by March 2016. Hock Tan, president and CEO of Avago, will hold the same position in the combined company, Broadcom Limited. Broadcom founders Henry Samueli and Henry Nicholas will both continue with the company, with Samueli serving as CTO, and Nicholas in a strategic advisory role.
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