This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Avago Acquires LSI for $6.6B

NEW YORK (TheDeal) -- Chipmaker Avago Technologies (AVGO - Get Report) said Monday it would acquire LSI Corp. (LSI) in a $6.6 billion cash deal that would expand the buyer's reach into the storage chip market.

Terms call for Singapore-based Avago to pay $11.15 per share for LSI, a premium of 41% to the target's Friday close. Avago said it would fund the deal in part via a $1 billion investment from private equity firm Silver Lake Partners, which is buying a seven-year convertible note in the company.

LSI, of San Jose, Calif., is a maker of storage chips used in data centers, flash drives and hard disks. Avago, which specializes in wired infrastructure, wireless and industrial chips, said that the purchase would leave it well positioned to benefit from growth in mobile data and data centers. The deal "positions Avago as a leader in the enterprise storage market and expands our offerings and capabilities in wired infrastructure, particularly system-level expertise," company CEO Hock Tan said in a statement. "This combination will increase the company's scale and diversify our revenue and customer base."

The purchase was billed as the largest cash deal yet between two strategics in the semiconductor sector, and the biggest semiconductor deal since the 2006 leveraged buyout of Freescale Semiconductor (FSL) for $17.6 billion. Avago said it expects the deal to contribute to non-GAAP free cash flow and earnings per share immediately, with the company estimating $200 million in annual operating synergies by the end of fiscal 2015. The deal will be funded with $1 billion in cash on hand as well as the new Silver Lake capital and a $4.6 billion term loan from a banking consortium.

Must Read: Sprint and T-Mobile Merger? You Vote

Silver Lake has been involved with Avago since 2005, when it partnered with Kohlberg Kravis Roberts & Co. to buy the company from Agilent Technologies A for $2.7 billion. Avago went public in 2011.

LSI chief executive Abhi Talwalkar said the deal "provides immediate value to our stockholders, and offers new growth opportunities for our employees to develop a wider range of leading-edge solutions for customers."

Chris Colpitts, David Locala and Mark Keene of Deutsche Bank AG are advising Avago.

-- Written by Lou Whiteman

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
LSI $0.00 0.00%
AVGO $130.45 0.00%
AAPL $118.30 0.00%
FB $104.24 0.00%
GOOG $742.60 0.00%


Chart of I:DJI
DOW 17,719.92 -78.57 -0.44%
S&P 500 2,080.41 -9.70 -0.46%
NASDAQ 5,108.6660 -18.8590 -0.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs