Avago Technologies snaps up Broadcom in huge $37bn move

Chip manufacturer Avago Technologies has announced that it will be snapping up Broadcom in a major move which will cost it $37 billion (£24 billion).

Avago will fork out $17 billion (£11 billion) in cash – almost half of which is on hand, the remainder coming from a consortium of banks – and the rest will be equity valued at around $20 billion (£13 billion). That means Broadcom shareholders will own a third of the combined company after the deal is completed.

The resulting behemoth will take in an annual revenue of around $15 billion (£10 billion), and Avago expects to see $750 million (£490 million) of annual cost synergies achieved within 18 months after the buyout.

After the deal has gone through – which should be by the close of Q1 2016, depending on the usual regulatory approval – Hock Tan, the president and CEO of Avago, will continue in those roles heading up the combined firm which will be called Broadcom Limited.

Dr. Henry Samueli, co-founder, and current chief technical officer and chairman of the board of Broadcom, will sit on the board of the new company and will become its chief technology officer.

Hock Tan commented: "Today's announcement marks the combination of the unparalleled engineering prowess of Broadcom with Avago's heritage of technology from HP, AT&T, and LSI Logic, in a landmark transaction for the semiconductor industry.

"The combination of Avago and Broadcom creates a global diversified leader in wired and wireless communication semiconductors. Avago has established a strong track record of successfully integrating companies onto its platform. Together with Broadcom, we intend to bring the combined company to a level of profitability consistent with Avago's long-term target model."

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