Broadcom to Buy CA Technologies for $18.9 Billion in Cash

Broadcom agreed to acquire CA Technologies for $18.9 billion in cash, branching out into corporate software to diversify its business, according to Bloomberg.

Broadcom will pay $44.50 per share, a 20 percent premium to the CA’s closing price on Wednesday, the companies said in a statement after markets closed for the day. The deal will immediately add to Broadcom’s earnings once completed, which is expected in the fourth quarter.

Under CEO Hock Tan, Broadcom has transformed itself through a string of deals into one of the world’s largest chipmakers. Last year, Tan launched an ambitious attempt to grow even bigger through the purchase of rival mobile-chip maker Qualcomm. That hostile takeover bid was blocked in March by the U.S government on national-security grounds.

With a deal for CA, Broadcom will move into software used to manage business planning and other processes, adding a steady stream of recurring revenue from long-term contracts. The company implied that it will do more deals. "This transaction represents an important building block as we create one of the world’s leading infrastructure technology companies,“ Tan said in the statement. “We intend to continue to strengthen these franchises to meet the growing demand for infrastructure software solutions.

CA has projected sales of $4.25 billion to $4.29 billion this fiscal year which would represent a slight rise from fiscal 2018. Revenue climbed 5 percent in that period, and was little changed or fell for the five years prior to that. In the fourth fiscal quarter, about half of the company’s revenue still came from solutions for mainframes. That area contributes 90 percent of the company’s profit.