Chipmaker Broadcom nears $19 billion deal to buy software company CA: sources

July 11, 2018

(Reuters) – Broadcom Inc is nearing a roughly $19 billion deal to acquire U.S. business software company CA Inc, in a bid to diversify its technology offerings beyond semiconductors, people familiar with the matter said on Wednesday.

FILE PHOTO: A sign to the campus offices of chip maker Broadcom Ltd, who announced on Monday an unsolicited bid to buy peer Qualcomm Inc for $103 billion, is shown in Irvine, California, U.S., November 6, 2017. REUTERS/Mike Blake

The deal would come just four months after U.S. President Donald Trump blocked Broadcom’s $117 billion hostile bid for semiconductor peer Qualcomm Inc, because it posed a threat to U.S. national security and gave an edge to Chinese companies looking to build next-generation wireless networks.

Since then, Broadcom has redomiciled from Singapore to the United States, placing it formally outside the purview of the Committee on Foreign Investment in the United States (CFIUS), the government panel that reviews deals for potential national security risks.

Broadcom has toyed with buying non-semiconductor companies before, as with its $5.5 billion acquisition of wireless networking gear company Brocade Communications Systems. Broadcom shares fell $13.94 or 5.52 percent in after-hours trading to $229.50 after the Wall Street Journal first reported the deal with CA.

The deal, which will value CA at $44.50 per share, is expected to be announced later on Wednesday, the sources said, asking not to be identified ahead of an official announcement. CA shares ended trading on Wednesday at $37.21, and rose 15.6 percent after hours.

Broadcom and CA did not immediately respond to requests for comment.

Broadcom, under its dealmaker chief executive, Hock Tan, has been on an acquisition spree as some of its major customers, such as Apple Inc and Samsung Electronics Co Ltd look to consolidate supplier relationships and slash costs. Private equity firm Silver Lake is also an investor in Broadcom, which has a market capitalization of $105 billion.

In March, Trump signed an order to halt what would have been the biggest-ever technology deal between Broadcom and Qualcomm on concerns it would erode the United States’ lead in mobile technology and pave the way for China to gain the upper hand.

CA, formerly known as Computer Associates, has its roots in providing mainframe computers used by banks and other large institutions. It has been shifting much of its business to the cloud to become more competitive with corporate customers.

CA CEO Mike Gregoire has been looking for a deal for some time.

CA last year held talks to merge with private equity-owned peer BMC Software. After those talks fell through, BMC agreed earlier this year to sell itself to private equity firm KKR & Co Inc for $8.5 billion.

Reporting by Greg Roumeliotis in New York; Editing by Jonathan Oatis and Lisa Shumaker

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