Avago Technologies Ltd (NASDAQ:AVGO) Buys Out LSI Corp (LSI) For $6.6 Billion – LSI, AMAT, AAPL


Dallas, Texas 12/17/2013 (FINANCIALSTRENDS) – Avago Technologies Ltd (NASDAQ:AVGO) which is a $12.41 billion market capped firm which has been a robust semiconductor player which produces storage devices. During trading yesterday, the stock of this firm jumped up by a huge 9.75 percent on the news becoming public that it has


bought out LSI Corp (NASDAQ:LSI) by shelling out a big $6.6 billion. With this buyout Avago Technologies Ltd (NASDAQ:AVGO) improves its standing in the burgeoning storage chip segment which is being driven by the continued build up in momentum of digital devices like smart phones, tablets and cameras which use these devices to store data.

Gains Major Market Share Thanks To The Deal

Commenting about this acquisition, Avago Technologies Ltd (NASDAQ:AVGO) Chief Executive Officer Hock Tan has been quoted as saying, “The wireless business’ share of Avago’s revenues will fall by half to 25 percent. This buyout will help reduce exposure to that sector’s volatility, which is only expected to increase going forward.”

LSI Corp (NASDAQ:LSI) is a $5.97 billion market capped firm which was the largest supplier of storage devices to other industry bigges like Seagate.  On the news of the buyout by wireless player Avago Technologies Ltd (NASDAQ:AVGO) became public, the stock price sky of LSI Corp rocketed by a huge 38.56 percent in yesterday trading.

Consolidation Across The Storage Industry

This buy out by Avago Technologies Ltd (NASDAQ:AVGO) comes on the back of similar consolidation moves afoot in the storage space market in U.S. Earlier this year in September, Applied Materials, Inc.(NASDAQ:AMAT) had bought out its competitor Tokyo Electron Ltd for $ 7 billion. Readers should also note that Avago Technologies Ltd (NASDAQ:AVGO) boasts of its own blue chip clientele including Apple Inc. (NASDAQ:AAPL), Samsung Electronics Co Ltd, LG Electronics Inc and Huawei Technologies Co Ltd. which all manufacture digital devices which can be ready made customers for the storage devices.

Funding For The Deal

Avago Technologies Ltd (NASDAQ:AVGO) will be taking the help of Silver Lake Partners which will fund  $1 billion to the company in exchange of preferential bonds which will have a seven year term. It will also use one billion dollars cash it has at hand and will raise the reminder $4.6 billion in the form of term loans which will be borrowed from a consortium of banks.

Stock Performance

The stock of Avago Technologies Ltd (NASDAQ:AVGO has been trading between $29.98 and $48.31 per share during trading over the past 12 months.  After yesterday’s spurt in the stock price it is trading at 3.71 percent above its prior 52 week high price point.  This increase has also been spread across the past 12 months. In the past year it has managed to post 63 percent increase in its market value coupled with income of $539 million in the same period. It has managed to post sales of $2.4 billion in the same period. It has also paid out dividend of $0.92 per share which translates to a dividend yield of 1.84% over the trailing 12 month period.