Avago buys chip maker LSI for $6.6bn

Micro Electronics

by CBR Staff Writer| 17 December 2013

Avago Technologies expects that its combined annual revenue will reach $5bn.

Singapore-based chip maker Avago Technologies has acquired the US-based electronics firm LSI for an all-cash transaction worth $6.6bn.

The transaction is expected to strengthen Avago's position in enterprise storage segment, expand its market position in wired infrastructure and increase its annual revenue to $5bn.

The joint company is expected to be able to benefit from the growing opportunities created by the rapid increases in data centre IP and mobile data traffic, the company said.

Avago president and chief executive officer Hock Tan said The acquisition positions the company as a leader in the enterprise storage market and expands its offerings and capabilities in wired infrastructure, particularly system-level expertise.

"This combination will increase the Company's scale and diversify our revenue and customer base," Tan added.

"In addition to these powerful strategic benefits, 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."

LSI president and chief executive officer Abhi Talwalkar said the transaction provides immediate value to the company's stockholders, and offers new growth opportunities for its employees to develop a wider range of applications for customers.

"Our leadership positions in enterprise storage and networking, in combination with Avago, create greater scale to further drive innovations into the datacenter," Talwalkar added.

The acquisition is expected to be immediately added to Avago's non-GAAP free cash flow and earnings per share, while the company anticipates an annual cost savings of $200m by 2015.

Approved by the boards of directors of both companies, the transaction is subject to regulatory approvals as well as customary closing conditions and the approval by LSI's stockholders.

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