Broadcom Inc announced a $18.9 billion deal to buy U.S. business software company CA Inc on Wednesday, venturing far beyond its realm of semiconductors and testing investors\u2019 confidence in its Chief Executive Hock Tan\u2019s dealmaking credentials.<\/p>\n
The CA deal, outlined in a joint statement from the companies, comes just four months after U.S. President Donald Trump blocked Broadcom\u2019s $117 billion hostile bid for semiconductor peer Qualcomm Inc, arguing it posed a threat to U.S. national security and gave an edge to Chinese companies looking to build next-generation wireless networks.<\/p>\n
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.<\/p>\n
Dealmaking has been key to Broadcom\u2019s expansion, as it grew from a 4 percent share of the chip market in 2013 to a 30 percent share this year, thanks to acquisitions spearheaded by Tan with backing from private equity firm Silver Lake.<\/p>\n
Tan\u2019s selection of CA as Broadcom\u2019s next acquisition target, however, took Wall Street by surprise, and drove Broadcom shares down 7 percent in after-hours trading. Investors and analysts scrambled to identify potential synergies, as the deal looked more like a financial investment rather than a combination of complementary businesses.<\/p>\n
\u201cInvestors will wrestle and try to gain comfort in (the) strategic rationale and its impact to capital allocation,\u201d RBC Capital Markets analyst Amit Daryanani wrote in a note to clients, adding that \u201clots of explanation (is) needed.\u201d<\/p>\n