Semiconductor manufacturer Broadcom Inc. is buying New York City-based software firm CA Technologies for $18.9 billion (all figures USD), in a bid to create what the former calls "one of the world's leading infrastructure technology companies".
Broadcom said it intends to fund the deal with cash on hand and US$18 billion in new debt financing. Longbow Research lowered shares of Broadcom from a "buy" rating to a "neutral" rating in a research report on Thursday.
Mike Gregoire, CA Technologies CEO, said the combination would align his companies "expertise in software with Broadcom's leadership in the semiconductor industry".
But analysts questioned the deal.
Broadcom's famously ambitious chief executive has built the company from a fledgling chip maker to a global powerhouse through a series of big deals, and is widely respected by Wall Street for his business acumen. But Hao resigned from Broadcom's board because the chipmaker is now going to be hunting for enterprise software companies that Silver Lake may also want to buy, the people said. The company's revenue for the quarter was up 19.4% compared to the same quarter past year. Brocade's networking gear often connects to mainframes provided by IBM, and those are the same mainframes that CA's software caters to, which provides some justification for the acquisition. CA Technologies has made nearly 17 purchases in the past ten years, and Broadcom has made almost 11 acquisitions in the last ten years. (AVGO) said it agreed to acquire CA Technologies (CA). Broadcom at the time was incorporated in Singapore, .
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CA's shareholders will receive $44.50 per share, a 20 percent premium over the closing price of the company's stock today.
Careal Property Group AG and affiliates, who collectively own approximately 25% of the outstanding shares of CA common stock, have entered into a voting agreement to vote in favor of the transaction.
Broadcom's main semiconductor business is becoming more competitive as major customers such as Apple and Samsung Electronics look to consolidate supplier relationships and slash costs.
First National Bank of Hutchinson bought a new stake in Broadcom Inc (NASDAQ:AVGO) during the second quarter, according to the company in its most recent filing with the Securities and Exchange Commission (SEC).
However, Susquehanna analyst Christopher Rolland likes the financial rationale for the deal: "While more details are to come, we took an early stab at the numbers". Talks past year to merge with private equity-owned peer BMC Software fell through.