Avago Tech to buy Broadcom for $37 billion
Upon completion of the acquisition, the combined company will have the most diversified communications platform in the semiconductor industry, with combined annual revenues of approximately $15 billion.
Under the terms of the definitive agreement, Avago will acquire Broadcom for $17 billion in cash consideration and the economic equivalent of approximately 140 million Avago ordinary shares, valued at $20 billion as of May 27, 2015, resulting in Broadcom shareholders owning approximately 32% of the combined company.
Based on Avago's closing share price as of May 27, 2015, the implied value of the total transaction consideration for Broadcom is $37 billion.
Holders of outstanding shares of Broadcom will have the ability to elect to receive, for each Broadcom share held: $54.50 in cash; 0.4378 ordinary shares in a newly-formed Singapore holding company (HoldCo); a restricted equity security that is the economic equivalent of 0.4378 ordinary shares of HoldCo that will not be transferable or saleable for a period of one to two years after closing; or a combination thereof.
The shareholder election will be subject to a proration mechanism, which is anticipated to result in payment in the aggregate in the range of 50% cash and 50% equity in the transaction. Upon closing of the transaction, Avago shareholders will exchange their ordinary shares for HoldCo ordinary shares on a one to one basis.
No trading market is expected to develop for the restricted equity. The receipt of the restricted equity is expected to be tax free to former Broadcom shareholders, and if a requested tax ruling is obtained from the IRS, the receipt of HoldCo ordinary shares will also be tax free to the Broadcom shareholders.
Receipt of HoldCo ordinary shares by former Avago shareholders is expected to be tax free.
Avago intends to fund the $17 billion of cash consideration with cash on hand from the combined companies and $9 billion in new, fully-committed debt financing from a consortium of banks. ■