The deal will have Broadcom spending a total of $18.90 billion in cash to acquire CA Technologies. This translates to an offer of $44.50 per share for CA stock. That’s a 20% premium to CA stock’s closing price as of July 11, 2018.
Broadcom says that it will be using a mix of cash on-hand and new debt financing to fuel its purchase of CA Technologies. However, the cash on hand only makes up $900 million of the offer. The other $18 billion is from the new debt financing.
Broadcom is expecting the deal to be immediately accretive to its earnings. This includes long-term Adjusted EBITDA margins up more than 55%, as well as an increase to its earnings per share. It is also expecting last twelve months non-GAAP revenue of $23.90 billion and last twelve months non-GAAP Adjusted EBITDA of roughly $11.6 billion after the deal completes.
The current expectations are for the deal between Broadcom and CA Technologies to close during the fourth quarter of 2018. Before this can happen, the deal will need to complete customary closing conditions. This includes regulatory approval and a confirming vote from shareholders.
Broadcom notes that Careal Property Group AG and it affiliates have already agreed to vote in favor of the deal. Together, they hold 25% of CA stock. The company also points out that the deal has the approval of both it and CA’s Boards of Directors.
AVGO stock was down 14% and CA stock was up 18% as of Thursday morning.
As of this writing, William White did not hold a position in any of the aforementioned securities.