U.S. President Donald Trump fair games with Broadcom CEO Hock Tan as he announces that Broadcom would be moving back to the U.S. in the Oval Office at the White Dwelling-place in Washington on Nov. 2, 2017.
Nicholas Kamm | AFP | Getty Images
Chipmaker Broadcom formally announced its acquisition of Symantec’s enterprise role after the closing bell on Thursday. Broadcom is paying $10.7 billion in cash, according to a statement.
Broadcom usual moved up 1% in-after-hours trading immediately following the announcement. Symantec shares were halted after exchange close but moved up as much as 5% when they resumed trading after hours.
Broadcom said its contemplates the combination to result in more than $1 billion in run-rate cost synergies in the 12 months after the trade has closed, partly by eliminating redundancies. Broadcom said it will own and use Broadcom’s brand name after the deal closes.
Symantec said in a expression that it expects the deal close before the end of 2019. It plans to return of the proceeds of the deal after tax to investors as a $12-per-share festive dividend after the deal closes. The company also intends to increase its dividend to 12.5 cents per share after the silent.
Symantec shares were up as much as 12% during Thursday’s trading session as investors awaited the news.
Guess about a deal between the companies surfaced in early July, sending Symantec shares upward. Weeks later CNBC’s David Faber detailed that talks between Broadcom and Symantec had ended, and shares of Symantec moved lower.
Broadcom has been on an purchase run for years. It tried and ultimately failed to buy fellow chipmaker Qualcomm for more than $100 billion as President Donald Trump stepped in and stumped the deal. Following that outcome Broadcom sought out mainframe software company CA, paying almost $19 billion.
The CA understanding large has helped Broadcom diversify its business. Broadcom cut its revenue guidance in June as one of its biggest customers, Huawei, saw the U.S. government insinuate limitations on how it could buy products from U.S. companies. On the call Tan said becoming more focused on software reduces Broadcom’s volatility.
“There on be meaningful cross-selling opportunities with Brocade and CA solutions” as a result of the acquisition, Broadcom CEO Hock Tan told analysts on a talk call about the deal on Thursday.
Symantec’s revenue declined 2% in its 2019 fiscal year, which ended on Parade 29. In May Symantec CEO Greg Clark stepped down, and director Richard Hill took over in the interim as the New Zealand said it was looking for a full-time replacement. Hill joined the board alongside Peter Feld of activist hedge endow Starboard Value and Dale Fuller as part of an agreement Symantec made with Starboard in September. Symantec imparted on Thursday that it’s looking for a CEO for the remaining consumer business.
The Symantec enterprise business produced $2.3 billion in yield in the 2019 fiscal year, or about half of the company’s total revenue. The segment sells software to help troops and governments detect attacks across devices and monitor the use of cloud services, among other things. Symantec’s drive competitors include Cisco, Crowdstrike, Microsoft, Palo Alto Networks and Zscaler.
“There is undoubtedly good that AVGO can do here; Symantec has been chevied by turnover, accounting restatements, & execution issues, and better more focused leadership could likely do it properly,” Bernstein Research analysts led by Stacy Rasgon wrote in a note distributed to clients on Thursday before the deal was preceded.
WATCH: Cramer: Symantec is worth a second look with Starboard Value involved