Semiconductor maker Avago Technologies has agreed to buy Broadcom in a massive $37 billion deal.
Broadcom said the transaction includes consideration of $17 billion in cash, as well as equity valued at approximately $20 billion as of May 27, 2015. The companies expect $750 million of projected annual cost synergies to be achieved within 18 months of approval.
Combined value of the two companies was pegged at $77 billion. Annual revenues for the combined company, which will be called Broadcom Limited, are expected to be approximately $15 billion, and Broadcom shareholders will maintain about 32 percent of the total combined company.
Scott McGregor, president and CEO of Broadcom, said the deal benefits Broadcom shareholders, as well as the company’s customers.
“Our customers will gain access to a greater breadth of technology and product capability,” McGregor said in a statement. “For our shareholders, the transaction provides both compelling up-front value as well as the opportunity to participate in the future upside of the combined business.”
In a statement, Hock Tan, president and CEO of Avago, called the deal a “landmark transaction for the semiconductor industry.”
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.
Closing of the transaction is expected by the end of the first calendar quarter of 2016, and is subject to regulatory approvals in various jurisdictions, as well as the approval of Avago’s and Broadcom’s shareholders.
Tan will continue to serve as president and CEO of the combined company, which will adopt the name Broadcom Limited. Dr. Henry Samueli, co-founder, CTO, and Chairman of the Board of Broadcom, will join the board of the combined company as will another director from Broadcom. In addition, Dr. Samueli will be appointed CTO of the combined company.
Shares of Broadcom jumped almost $10 per share in afternoon trading following a report on the deal from the Wall Street Journal. As of Thursday morning, shares of Broadcom were trading at approximately $57. Meanwhile, shares of Avago were up 1.4 percent Thursday to $143 in early trading.