Avago Technologies Ltd. acquires LSI Corp.
The second-largest deal in the semiconductor industry has just occurred, according to an article on Bloomberg Businessweek. Avago Technologies Ltd., a Singapore-based chip manufacturer, will buy LSI Corp. for $6.6 billion. The resulting company will earn a reported $5 billion in annual revenue.
Founded in 1961 by Hewlett-Packard, Avago was an early pioneer in the light-emitting diode (LED) display market before investing heavily in fiber-optic transmitters. The company is seeking to acquire a wide range of storage chips that it can turn around and sell to data centers. LSI specializes in developing storage and networking semiconductors, which are skills that Avago can use to improve its own wireless and wired communication business.
In addition, the technology acquisition will allow the newly-merged company to save millions thanks to overlapping operating costs.
"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," Avago CEO Hock Tan said in a statement. "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."
The terms of the deal stipulate that LSI stockholders will receive $11.15 for each share. So far, the deal seems to have been good for both companies's stocks. LSI shares rose by 39 percent to $10.96, while Avago saw a 10 percent increase to $50.40.
A well-executed technology acquisition can boost the portfolios of all parties involved while also setting the groundwork for future success. Merger and acquisitions consultants can help this process along.