Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Nasdaq  >  Broadcom Inc    AVGO

BROADCOM INC (AVGO)
Mes dernières consult.
Most popular
  Report  
SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsofficial PublicationsSector newsTweets

Broadcom : bond spreads blow out after surprise CA bid

share with twitter share with LinkedIn share with facebook
share via e-mail
0
07/12/2018 | 07:59pm CEST

NEW YORK (IFR) - Broadcom bondholders were left rattled Thursday after the chipmaker announced a surprise US$18.9bn (£14.3 billion) bid to buy U.S. business software company CA.

NEW YORK (IFR) - Broadcom bondholders were left rattled Thursday after the chipmaker announced a surprise US$18.9bn (£14.3 billion) bid to buy U.S. business software company CA.

Broadcom, rated BBB-/BBB, is set to finance the acquisition with US$18bn of unsecured term loans.

Investors have become increasingly cautious about the Triple B rated debt bracket, as M&A continues to cause that segment of the market to balloon, leaving investors at risk of mass downgrades into junk if the economy turns.

Broadcom, which announced the plan to acquire CA on Wednesday, said it expected the combined company to have an investment grade rating, and promised "rapid deleveraging", but bondholders weren't so sure.

The spread on Broadcom's 3.625% 2024s widened as much as 24bp on Thursday - their highest since the bonds were issued in February, according to MarketAxess data.

Broadcom's outstanding debt stood at US$17.5bn as of May 6.

The CA bid has unnerved both debt and equity investors, because it takes the company into an entirely new market.

It also leaves the status of Broadcom's planned US$12bn share buyback, announced in April, unclear.

Shares of Broadcom fell sharply, dropping about 15.11% around 1:45 pm in New York. By midday Thursday, Broadcom had lost as much as US$19bn in market value, Reuters reported, as analysts struggled to find any obvious synergies between the two companies.

Broadcom's chips power smartphones, computers and networking equipment. CA specializes in software for so-called mainframes.

"We are left a bit perplexed and expect investors will be as well," Credit Suisse equity research analysts led by John Pitzer wrote in a note to clients Wednesday.

"We suspect without further explanation the CA acquisition will likely shake investor confidence in the core business."

Analysts from research firm CreditSights said Broadcom spreads could continue to widen over the coming days.

"While leverage metrics should remain reasonable and the company should generate nearly US$4bn in free cash flow after dividends in year 1, the pace of post-deal debt reduction and Broadcom's ultimate leverage target remain uncertain," analysts wrote.

The deal should take Broadcom's leverage to roughly 3x gross at close, according to CreditSights. Analysts believe the company could get down to 2x gross leverage in less than three years thanks to its strong cash flow generation.

Broadcom's bid for CA comes just four months after its US$117bn bid to buy rival Qualcomm was blocked by US President Donald Trump.

Since then, Broadcom has redomiciled from Singapore to the US. The move places it outside the purview of the Committee of Foreign Investment in the United States.

The deal is expected to close in the fourth quarter.

(Reporting by Eleanor Duncan; Editing by Jack Doran)

By Eleanor Duncan

Stocks mentioned in the article
ChangeLast1st jan.
CA TECHNOLOGIES -0.02% 44.05 Delayed Quote.32.39%
share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on BROADCOM INC
07/13TODAY'S RESEARCH REPORTS ON STOCKS T : Broadcom and CA Inc.
AC
07/13Broadcom Deal Gets Punishing Reception -- WSJ
DJ
07/12Broadcom Shares Sink as Latest Deal Puzzles Wall Street
DJ
07/12Broadcom loses $19 billion in market value after bid to buy CA
RE
07/12Broadcom's ambitious deal history under CEO Hock Tan
RE
07/12BROADCOM : bond spreads blow out after surprise CA bid
RE
07/12TODAY'S RESEARCH REPORTS ON TRENDING : Broadcom and AXT
AC
07/12CA, INC. ALERT : Johnson Fistel Investigates Proposed Sale of CA, Inc. to Broadc..
PR
07/12BROADCOM INC. : Entry into a Material Definitive Agreement, Change in Directors ..
AQ
07/12Broadcom Moves Into Software With CA Deal -- WSJ
DJ
More news
News from SeekingAlpha
07/16Your 52 Top Yield, Upside, & Net Gain NASDAQ Stocks For July 
07/16DIVIDEND SENSEI'S PORTFOLIO UPDATE 4 : The 3 Essential Things All Investors Need.. 
07/16Broadcom's 17% Price Drop Is A Gift 
07/16Merger Arbitrage Mondays - July 16, 2018 
07/16The Smart Way To Find Undervalued Stocks 
Financials ($)
Sales 2018 20 755 M
EBIT 2018 10 060 M
Net income 2018 11 772 M
Debt 2018 9 387 M
Yield 2018 3,34%
P/E ratio 2018 7,86
P/E ratio 2019 15,61
EV / Sales 2018 4,66x
EV / Sales 2019 4,47x
Capitalization 87 398 M
Chart BROADCOM INC
Duration : Period :
Broadcom Inc Technical Analysis Chart | AVGO | US11135F1012 | 4-Traders
Technical analysis trends BROADCOM INC
Short TermMid-TermLong Term
TrendsBearishBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 35
Average target price 301 $
Spread / Average Target 49%
EPS Revisions
Managers
NameTitle
Hock E. Tan President, Chief Executive Officer & Director
James V. Diller Chairman
Boon Chye Ooi Senior Vice President-Global Operations
Thomas Harry Krause Chief Financial Officer
Henry Samueli Chief Technical Officer & Director
Sector and Competitors
1st jan.Capitalization (M$)
BROADCOM INC-21.19%105 088
INTEL CORPORATION13.13%243 345
TAIWAN SEMICONDUCTOR MFG. CO. LTD.--.--%190 464
NVIDIA CORPORATION28.85%151 337
TEXAS INSTRUMENTS10.25%112 713
MICRON TECHNOLOGY37.04%65 355