Summary
Broadcom Inc. (AVGO) announced the completion of its acquisition of CA, Inc. for approximately $18.7 billion in cash on November 5, 2018. This significant transaction was funded through a combination of unsecured debt incurred under a newly established credit facility and existing cash on hand. The company secured a $23 billion unsecured credit facility, comprising a $5.0 billion revolving facility, a $9.0 billion Term A-3 facility, and a $9.0 billion Term A-5 facility, to finance this acquisition. In conjunction with the CA acquisition, Broadcom has also entered into an agreement to divest Veracode, Inc., a CA subsidiary, to Thoma Bravo, LLC for $950 million. This divestiture signals a strategic move to potentially streamline its portfolio post-acquisition. Investors should monitor the integration of CA's business and the financial implications of the substantial debt taken on, alongside the strategic rationale behind the Veracode sale.
Key Highlights
- 1Completion of the acquisition of CA, Inc. for approximately $18.7 billion in cash.
- 2Financing for the acquisition primarily through a new $23 billion unsecured credit facility.
- 3The credit facility includes a $5.0 billion revolving credit facility and two term loan facilities ($9.0 billion each).
- 4The acquisition was structured as a merger of Broadcom's subsidiary with CA, Inc., with CA becoming a wholly owned subsidiary.
- 5Broadcom has agreed to sell Veracode, Inc. (a subsidiary of CA) to Thoma Bravo, LLC for $950 million.
- 6The Credit Agreement includes a financial covenant requiring a Consolidated Interest Coverage Ratio of not less than 3.00:1.00.