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Broadcom Makes $10.7 Billion Deal to Buy Symantec’s Corporate-Focused Security Business

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Broadcom
Inc.

struck a $10.7 billion deal to purchase

Symantec
Corp.

’s enterprise safety enterprise, because it steps up efforts to develop past chip making.

Semiconductor maker Broadcom, which has a historical past of acquisitions, stated Thursday the money acquisition was the subsequent logical step in constructing a enterprise round tender

ware for firms.

The Wall Avenue Journal on Wednesday reported the 2 firms had been near a deal after talks for Broadcom to purchase all of Symantec collapsed final month.

The a part of Symantec, greatest identified for its antivirus software program, that Broadcom is shopping for focuses on gross sales to firms. That half contributes about half of Symantec’s $5 billion in annual income. The buyer phase accounts for the remainder of the 37-year-old firm’s income.

Broadcom Chief Govt Hock Tan has been centered on diversifying past the corporate’s core chip enterprise and pushing into the profitable software program area. Final yr, he struck a roughly $19 billion deal to purchase software program agency CA Applied sciences, previously Pc Associates.

The Symantec enterprise will add an anticipated $2 billion to Broadcom’s annual income going ahead, Broadcom stated, and would generate financial savings of greater than $1 billion by eliminating value overlaps within the yr after the deal closed.

After the deal closes, Broadcom will personal the Symantec model identify, the 2 firms stated.

Broadcom stated it will keep its dividend coverage of paying buyers half of its free money move from the earlier fiscal yr, and use extra money to pay down debt quite than repurchase shares. The chip maker maintained its steering of producing $22.5 billion in income for the present fiscal yr that ends in November.

Broadcom’s efforts to diversify into software program via acquisitions have gained explicit significance after the chip maker’s try in 2018 to purchase rival

Qualcomm
Inc.

failed. President Trump blocked that proposed takeover, citing safety dangers. Broadcom has since moved its headquarters from Singapore to San Jose, Calif., to assist alleviate such national-security issues.

Tech firms have been splurging on software program acquisitions, with massive offers and plenty of small ones.

Salesforce.com
Inc.

on Wednesday introduced the $1.35 billion acquisition of ClickSoftware Applied sciences Ltd., which works on workplace-management software program.

Microsoft
Corp.

final week acquired a small software program supplier, Blue-Talon, for an undisclosed quantity to bolster its cloud-computing enterprise.

Shares of Symantec surged greater than 12% Wednesday after The Wall Avenue Journal’s report, and climbed additional on Thursday.

Shares had fallen sharply in July after the 2 firms failed to achieve an settlement on the phrases of a full-company sale. Broadcom shares had been flat in after-hours buying and selling Thursday following a slight uptick on the shut.

Symantec stated it will pay a particular dividend of $12 a share and boosted a inventory repurchase program by $1.1 billion to $1.6 billion.

Rick Hill, Symantec’s interim chief government, stated the deal gave the corporate a narrower, however clearer, deal with the patron cybersecurity enterprise, which incorporates Norton antivirus merchandise. The $10.7 billion worth was engaging to Symantec, he stated, provided that the phase being bought accounted for simply 10% of working revenue in its final quarter.

Symantec is the world’s largest vendor of safety software program for company networks, however its client enterprise is much extra worthwhile, producing working margins of roughly 40%, based on a Bernstein Analysis word. Nonetheless, Broadcom buyers might welcome the narrower acquisition as a result of corporate-security software program is a greater match than the patron merchandise with its overarching technique, the word stated.

Individually, Symantec reported an 8% enhance in gross sales to $1.25 billion for the primary quarter of its monetary yr. It swung to a 4-cent per-share revenue within the interval from a 12-cent per-share loss for the year-prior quarter.

Symantec additionally introduced plans to chop round 7% of its workers and shut services as a part of a brand new restructuring plan.

As soon as the restructuring is full, it’ll go away Symantec far leaner. The corporate plans to dump underused property together with actual property that it expects to generate $1 billion of money. Its worker head depend, now 12,000, is predicted to drop to 2,500 in the long run, Chief Monetary Officer Vincent Pilette stated.

For Symantec, the deal ought to assist it go away behind turmoil of current years, together with accounting points that led to restated financials and government departures. In Could, Symantec’s former Chief Govt Greg Clark resigned abruptly, and its chief monetary officer, chief operations officer and chief advertising and marketing officer have additionally lately departed. A yr in the past it drew the eye of activist investor Starboard Worth LP, which struck a settlement for board illustration.

Goldman Sachs & Co. served as Symantec’s monetary adviser and Fenwick & West LLP was its authorized adviser. Broadcom’s monetary advisers included Financial institution of America Merrill Lynch,

Morgan Stanley
,

Citigroup
Inc.,

JP Morgan & Co.,

Barclays

PLC,

Financial institution of Montreal
,

Wells Fargo

& Co.,

HSBC Holdings

PLC and

Royal Financial institution of Canada
.

Its authorized adviser was Wachtell, Lipton, Rosen & Katz.

Write to Asa Fitch at asa.fitch@wsj.com

Copyright ©2019 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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