Avago will acquire LSI for an estimated $6.6 billion in cash; the two companies announced yesterday that they have entered into a definitive agreement. Avago, a Singapore based corporation with offices in Singapore and San Jose, California, is the descendant of an HP and Agilent Technologies spin-off that went public in an IPO in 2009.
Besides being a leading semiconductor manufacturer, Avago’s portfolio extends to a variety of wireless communications and wired infrastructure products that fit in well with datacenter, server, enterprise storage and switching, and high performance computing (HPC) applications. They currently hold, or have applied for, over 4,300 patents.
LSI designs and sells high performance storage and networking semiconductors that focus on hard disk drives, solid state drives, and flash storage; in other words, enterprise storage.
Both Avago and LSI sell to original equipment manufacturers (OEMs) in the server, storage, and networking markets. And both will benefit long-term from this agreement by advancing Avago’s move into the very open, and frequently discussed topic in tech news, enterprise storage market.
“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,” stated Hock Tan, President and Chief Executive Officer of Avago. “This combination will increase the Company’s scale and diversify our revenue and customer base. 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.”
Acquisitions like this take time and there are regulatory and shareholder approvals to formalize. Additionally, in acquisitions of this size and scope there are occasional lawsuits that are brought forward claiming more value could have been achieved for the purchased company. Since the deal will not close until sometime during the first half of 2014, some may crop up but at this time, none have surfaced.
The immediate benefit of this acquisition is to LSI shareholders whose share value jumped a little over 40% based on the closing stock price on Friday. Optimistically, for the customers, the long-term benefit will be the technology advances enterprise storage OEMs, and ultimately the customers, will gain from the complementary technologies, experience, and research and development these two tech companies bring to the table.
