Avago Technologies Ltd, a Singapore-based maker of semiconductors, has agreed to buy wireless chipmaker Broadcom Corp for US$37 billion in the industry’s biggest acquisition ever.
Avago is to pay US$17 billion in cash and US$20 billion in stock in the transaction, the companies said in a statement.
The offer values Broadcom at US$54.50 per share in cash, compared with its closing price of US$57.16 on Wednesday, when it rose 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 is the latest in a round of consolidation in the US$300 billion industry as the rising costs of production and design push manufacturers to combine.
Avago has been at the forefront of that wave with several acquisitions, including its US$5.6 billion purchase 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,” said Alex Gauna, an analyst at JMP Securities in San Francisco. “This seems like a stretch, like it has a touch of recklessness to it. It seems like a bridge too far to me.”
Broadcom, based in Irvine, California, represents a much bigger target for Avago. While the firm has a greater market value, at US$36.3 billion, Broadcom had higher sales last year, with US$8.4 billion compared with its potential acquirer’s US$4.9 billion.
A deal would be almost twice the size of NXP Semiconductors NV’s pending purchase of Freescale Semiconductor Ltd for about US$16.7 billion, including debt, which was announced in March.
Broadcom shares gained 22 percent to US$57.16 at the close in New York on Wednesday, its biggest one-day gain and highest value since 2001. Avago increased 7.8 percent to US$141.49 after the Wall Street Journal reported earlier that the companies were in advanced merger talks.
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