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  Date: 17/12/2013

Avago to acquire LSI for $6.6 Billion; quite a powering acquisition

The high speed communications and computing chip specialist Avago Technologies is agreed to acquire storage and networking chip specialist LSI Corporation for $6.6 Billion in Cash. Avago to acquire LSI for $11.15 per share in an all-cash transaction valued at $6.6 billion. The acquisition to help Avago to enter top 20 semiconductor companies list. Avago may get a ranking in between 10-15 top semiconductor companies, based on their present revenues. Well, is it possible to say the combined business to scale higher in next year ranking! there are high chances due to the speed at which cloud computing is installed around the world and the growth of high-speed mobile and wired networking infrastructure installations. Avago with LSI can serve better the networking, high-end computing and storage market. The big-data and security requirements also a big factor for the growth of companies such as Avago and LSI.

Avago says the combined business creates a highly diversified semiconductor market leader with approximately $5 billion in annual revenues by adding enterprise storage to Avago's existing wired infrastructure, wireless and industrial businesses.

"This highly complementary and compelling acquisition positions Avago as a leader in the enterprise storage market and expands our offerings and capabilities in wired infrastructure, particularly system-level expertise," stated Hock Tan, President and Chief Executive Officer of Avago. "This combination will increase the Company's scale and diversify our revenue and customer base. In addition to these powerful strategic benefits, as we integrate LSI onto the Avago platform, we expect to drive LSI's operating margins toward Avago's current levels, creating significant additional value for stockholders."

"This transaction 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," said Abhi Talwalkar, President and Chief Executive Officer of LSI. "Our leadership positions in enterprise storage and networking, in combination with Avago, create greater scale to further drive innovations into the datacenter."

Under the terms of the agreement, LSI's stockholders will receive $11.15 in cash for each share of LSI common stock they hold at closing, which is expected to occur during the first half of calendar 2014.

Avago said it intends to fund the transaction with $1.0 billion of cash from the combined balance sheet and fully-committed financing from the following sources:
A $4.6 billion term loan from a group of banks; and
A $1 billion investment from Silver Lake Partners, which is expected to be in the form of a seven year 2% convertible note with a conversion price of $48.04 per share or preferred stock with equivalent economic terms.
Author: Srinivasa Reddy N
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