Avago Technologies, a Singapore-based maker of semiconductors, agreed to buy Broadcom for $37 billion (R447bn) in the industry’s biggest acquisition ever.
Avago would pay $17bn of cash and $20bn in stock in the transaction, the companies said. The offer values Broadcom at $54.50 per share in cash, compared with a closing price of $57.16 on Wednesday, when the stock rose the most since 2001 after reports that a deal was imminent.
The Broadcom purchase creates the world’s sixth-largest chipmaker by revenue and is the latest in a round of consolidation in the $300bn 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 $5.6bn purchase of LSI 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… 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 Avago has a greater market value, at $36.3bn, the wireless chipmaker had higher sales last year, with $8.4bn, compared with its acquirer’s $4.9bn in sales.
Bloomberg