Avago Technologies is forming what it calls the "world's leading diversified communications semiconductor company" by acquiring Broadcom for $37 billion in cash and stock.
The deal, which will create a company worth $77 billion, had been expected following reports late Wednesday. (See Broadcom in Buyout Talks With Avago – Report.)
"The combination of Avago and Broadcom creates a global diversified leader in wired and wireless communication semiconductors," notes Avago's President and CEO Hock Tan in the official announcement of the deal.
Broadcom Corp. (Nasdaq: BRCM) is a major supplier of chips used in a wide variety of data center, home networking and wide area networking equipment. (See Broadcom Chips In on 4K Android Box, The Chips Fall for DOCSIS 3.1 , Broadcom Unveils Next Gen Ethernet Switch Chip and Broadcom Touts Hybrid Hardware Approach to NFV.)
Avago Technologies Pte. , which was spun out of Agilent in 2005 and which announced the acquisition of Emulex in February this year, sells chips used in wireless, data center and storage products. (See Avago Eyes Enterprise Storage With Emulex Buy, Avago Springs From Agilent and Avago Offers New 100G Transceiver Samples.)
The resulting chip giant, which will generate annual revenues of about $15 billion, will adopt the Broadcom name. Tan will retain the role of President and CEO while Dr. Henry Samueli, Broadcom's co-founder, chairman and CTO, will act as CTO of the new entity. Scott McGregor, the current president and CEO of Broadcom, does not appear to have a post-acquisition role at the company.
Avago says it will buy Broadcom using $17 billion in cash and about 140 million Avago shares, which were worth about $20 billion on May 27. Following the deal, which is set to close in the first quarter of 2016, Broadcom shareholders will own about 32% of the combined company.
Following reports of the expected deal, Broadcom's shares gained 21.45% on Wednesday to close at $57.15. In pre-market trading Thursday, the stock was trading down slightly at $56.56.
Avago's stock gained 7.8% on Wednesday to $141.49 and gained a further 4.8% to $148.25 in pre-market trading Thursday morning.
— Ray Le Maistre, , Editor-in-Chief, Light Reading