Avago Technologies nets financing for $37B Broadcom purchase

Avago Technologies plans to finance its $37 billion purchase of Broadcom, which was announced this morning, with $15.5 billion of new syndicated term loans, according to the company. Financing will come from Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank, Barclays, and Citigroup, sources said.

The issuer expects to refinance $6.5 billion of existing debt facilities and raise $9 billion of new money. A $500 million revolver would be undrawn at closing. The transaction would leverage Avago at roughly 2.7x, giving full credit for $750 million of synergies. Net of $1.3 billion of cash on hand, adjusted leverage would fall to 2.5x, according to an investor presentation.

In the secondary market, Avago’s B term loan due 2021 (L+300, 0.75% floor) was steady on the news this morning, quoted at 100.125/100.375. The $4.6 billion loan was issued at 99.5 in April 2014 to support its $6.6 billion acquisition of LSI Corp.

Enterprise value of the combined company would be roughly $77 billion. The combined company will annual revenue of approximately $15 billion.

Under the terms of the deal, Avago will acquire Broadcom for $17 billion in cash and the economic equivalent of approximately 140 million Avago ordinary shares, valued at $20 billion as of May 27, 2015, resulting in Broadcom shareholders owning approximately 32% of the combined company. Based on Avago’s closing share price as of May 27, 2015, the implied value of the total transaction consideration for Broadcom is $37 billion. – Staff reports

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