Broadcom has agreed to buy software company CA Technologies for $18.9 billion. According to The Wall Street Journal, Broadcom will pay $44.50 a share in cash for CA, formerly known as Computer Associates, which sells tools for mainframe computers. The news sent New York-based CA's shares surging after the closing bell on Wednesday (July 11), jumping more than 15 percent higher to $42.99, Financial Times reported.
However, Broadcom — which makes chips for Wi-Fi, Bluetooth and GPS connectivity in smartphones, as well as components for wired networks and data storage — saw its shares fall 2.8 percent in regular trading on Wednesday, and fell another 5.2 percent after hours. This led some analysts to question whether the deal made sense for the company.
“Software is a natural extension when you think about the ecosystem we’re playing in,” said Broadcom CFO Tom Krause in an interview.
He added that the deal will help the company expand in a market for infrastructure technology that amounts to $200 billion, about triple the size of its current opportunity. The deal doesn't require approval in China, or pose antitrust issues in other countries. With no obstacles, the acquisition is expected to be completed by the end of the year.
The announcement comes months after Broadcom had to walk away from its $117 billion-plus hostile bid for Qualcomm, which was blocked by The Committee on Foreign Investment in the United States (CFIUS). The panel, which looks into foreign deals, said the bid could have a negative effect on the U.S.’s technological competition with China, as well as hinder research and development at Qualcomm against foreign rivals racing to develop next-generation wireless technology.
Despite the failure of the Qualcomm deal, Broadcom Chief Executive Hock Tan, who took over at the company in 2006, still has a reputation as one of the most aggressive and successful acquirers in the technology industry.