Avago Plunges into Storage with $6.6 Billion LSI Acquisition

Avago Technologies (AVGO) will acquire LSI for $11.15 per share in an all-cash transaction valued at $6.6 billion, the companies said yesterday. Avago is a leading global supplier of a broad range of analog semiconductor devices, and with LSI will add enterprise storage to its mix of wired, wireless and industrial businesses.

“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,” said 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.”

Avago said it expects to achieve annual cost savings of $200 million in the first full fiscal year after closing. Avago funded the deal with $4.6 billion in loans from a group of banks, and a $1 billion investment from private equity firm Silver Lake Partners. The transaction has been approved by the boards of directors of both companies and is subject to regulatory approvals in various jurisdictions and customary closing conditions, as well as the approval of LSI’s stockholders.

“This transaction provides immediate value to our stockholders, and offers new growth opportunities for our employees to develop a wider range of leading-edge solutions for customers,” said Abhi Talwalkar, President and Chief Executive Officer of LSI. “Our leadership positions in enterprise storage and networking, in combination with Avago, create greater scale to further drive innovations into the datacenter.”