Broadcom to acquire CA Technologies for $18.9 bn in cash
13 July 2018
Chipmaker Broadcom Inc is acquiring enterprise software developer CA Technologies, a combination that will create one of the world’s leading infrastructure technology companies.
CA’s shareholders will receive $44.50 per share in cash, which represents a premium of approximately 20 per cent to the closing price of CA common stock on 11 July 2018, the last trading day prior to the transaction announcement, and a premium of approximately 23 per cent to CA’s volume-weighted average price for the last 30 trading days.
The all-cash transaction represents an equity value of approximately $18.9 billion, and an enterprise value of approximately $18.4 billion.
Hock Tan, president and CEO of Broadcom, said, the acquisition represented an important building block as the company created one of the world’s leading infrastructure technology companies.
"With its sizeable installed base of customers, CA is uniquely positioned across the growing and fragmented infrastructure software market, and its mainframe and enterprise software franchises will add to our portfolio of mission critical technology businesses. We intend to continue to strengthen these franchises to meet the growing demand for infrastructure software solutions,” he said
Mike Gregoire, CEO, CA Technologies said, “The benefits of this agreement extend to our shareholders who will receive a significant and immediate premium for their shares, as well as our employees who will join an organisation that shares our values of innovation, collaboration and engineering excellence.”
Bloomberg reported, the acquisition was accompanied by the resignation of long-time board member Ken Hao, Silver Lake managing partner, who’s been instrumental in Broadcom Inc.’s past acquisitions, to avoid a potential conflict of interest with Silver Lake's portfolio companies.
It added, the acquisition of CA is a "shift from Tan’s strategy to buy up rival semiconductor makers -- a master plan he dreamed up with Hao. It’s a new direction that threatens to bring Broadcom into direct competition with some of the companies that make up Silver Lake’s technology-focused portfolio."
As a global leader in mainframe and enterprise software, CA’s solutions help organisations of all sizes develop, manage, and secure complex IT environments that increase productivity and enhance competitiveness.
The merger is expected to drive Broadcom’s long-term adjusted EBITDA margins above 55 per cent and be immediately accretive to Broadcom’s non-GAAP EPS. On a combined basis, Broadcom expects to have last 12 months non-GAAP revenues of approximately $23.9 billion and last 12 months non-GAAP Adjusted EBITDA of approximately $11.6 billion.
Broadcom intends to fund the acquisition with cash on hand and $18.0 billion in new, fully-committed debt financing. Broadcom expects to maintain an investment grade rating, given its strong cash flow generation and intention to rapidly de-leverage.
The acquisition is subject to customary closing conditions, including the approval of CA shareholders and antitrust approvals in the U.S., the EU and Japan.
Careal Property Group AG and affiliates, who collectively own approximately 25 per cent of the outstanding shares of CA common stock, have entered into a voting agreement to vote in favour of the transaction.
Broadcom expects to close the deal in the fourth calendar quarter of 2018.