Avago, a leading designer and developer of compound semiconductors, has announced their intention to purchase the smaller LSI for $6.6 Billion. Avago, with its market cap of $11.3 Billion, is much larger than LSI, with a cap of $4.32 Billion.
Stocks of both companies are skyrocketing in early trading, with LSI up 38% in the first 6 minutes of trading, and Avago is up 11.7% and climbing.
Avago turned to Silver Lake for partial funding for the venture. Silver Lake, a technology investor, is a common player in the storage space. Silver Lake actually owned, and sold, Avago last year. The Avago deal was the largest payoff for Silver Lake, they received a 5X return on their investment, and have a seat on Avago's board.
Times are busy for Silver Lake, they also owned SMART Storage Systems and recently sold them to SanDisk.
Avago will pay $11.15 per share, which was 41% above LSI's closing stock price on Friday. That is sure to change with the stocks of both companies skyrocketing in early trading. LSI is up 38% in the first 6 minutes of trading, and Avago is up 11.7% and climbing.
The acquisition of LSI, with 32 years in the semiconductor business, will significantly expand Avagos portfolio. LSI makes an attractive target, with $2.5 Billion in revenue and $196.2 million in profit last year. The terms of the deal are still subject to approval from regulators and LSI shareholders. There isn't much doubt that the acquisition, six months in the making, will be approved. Stay tuned to TweakTown as we will cover any news as it develops.