Broadcom to acquire CA Technologies for $18.9 billion in cash

Broadcom, a leading semiconductor device supplier to the wired, wireless, enterprise storage, and industrial end markets, is acquiring software company CA Technologies for more than $18 billion. The all-cash transaction represents an equity value of approximately $18.9 billion, and an enterprise value of approximately $18.4 billion. The transaction is subject to customary closing conditions, including the approval of CA shareholders and antitrust approvals in the U.S., the EU and Japan. The transaction is expected to close in the fourth quarter of 2018.

Founded in 1976 by Russ Artzt, CA Technologies (formerly known as Computer Associates) creates software that fuels transformation for companies and enables them to seize the opportunities of the application economy. CA together with its subsidiaries, engages in the design, development, marketing, licensing, and support of information technology (IT) management software products that operate on a range of hardware platforms and operating systems. The company has a portfolio of software products and services that address its customers needs for mainframe and distributed environments, spanning IT governance, IT management, and IT security. It focuses on various areas that include infrastructure management, project and portfolio management, security management, service management, application performance management, and data center automation and virtualization.

Software is at the heart of every business in every industry. From planning, to development, to management and security, CA is working with companies worldwide to change the way we live, transact, and communicate – across mobile, private and public cloud, distributed and mainframe environments. Under the terms of the agreement, Broadcom would pay $44.50 a share for CA. Assuming it doesn’t fall apart at the last minute, the deal could be announced later Wednesday. CA shares closed at $37.21 Wednesday, meaning Broadcom would pay about a 20% premium. This represents a premium of approximately 20% to the closing price of CA common stock on July 11, 2018, the last trading day prior to the transaction announcement, and a premium of approximately 23% to CA’s volume-weighted average price (“VWAP”) for the last 30 trading days. The all-cash transaction represents an equity value of approximately $18.9 billion, and an enterprise value of approximately $18.4 billion.

Hock Tan, President and Chief Executive Officer of Broadcom, said, “This transaction represents an important building block as we create one of the world’s leading infrastructure technology companies. With its sizeable installed base of customers, CA is uniquely positioned across the growing and fragmented infrastructure software market, and its mainframe and enterprise software franchises will add to our portfolio of mission critical technology businesses. We intend to continue to strengthen these franchises to meet the growing demand for infrastructure software solutions.”

“We are excited to have reached this definitive agreement with Broadcom,” said Mike Gregoire, CA Technologies Chief Executive Officer. “This combination aligns our expertise in software with Broadcom’s leadership in the semiconductor industry. The benefits of this agreement extend to our shareholders who will receive a significant and immediate premium for their shares, as well as our employees who will join an organization that shares our values of innovation, collaboration and engineering excellence. We look forward to completing the transaction and ensuring a smooth transition.”

The transaction is expected to drive Broadcom’s long-term Adjusted EBITDA margins above 55% and be immediately accretive to Broadcom’s non-GAAP EPS. On a combined basis, Broadcom expects to have last twelve months non-GAAP revenues of approximately $23.9 billion and last twelve months non-GAAP Adjusted EBITDA of approximately $11.6 billion.

As a global leader in mainframe and enterprise software, CA’s solutions help organizations of all sizes develop, manage, and secure complex IT environments that increase productivity and enhance competitiveness. CA leverages its learnings and development expertise across its Mainframe and Enterprise Solutions businesses, resulting in cross enterprise, multi-platform support for customers. The majority of CA’s largest customers transact with CA across both its Mainframe and Enterprise Solutions portfolios. CA benefits from predictable and recurring revenues with the average duration of bookings exceeding three years. CA operates across 40 countries and currently holds more than 1,500 patents worldwide, with more than 950 patents pending.