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Avago's PLX Buyout 'Makes Sense' Say Analysts

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PLX Technology (NASDAQ: PLXT) will be acquired for $309 million by Avago Technologies (NASDAQ: AVGO).

Terms of the deal, approved by both companies' boards, call for Avago to launch a $6.50 per share tender offer for PLX, funded with Avago's available cash. The offer provides PLX shareholders with a 9.4 percent premium over Friday's closing price.

Sterne Agee's Vijay Rakesh said the deal will enable Avago to acquire market share, particularly in light of a trend toward cloud computing and so-called hyperscale data centers.

Rakesh maintains a Buy rating and $90 target on Avago.

Srini Nandury of Summit Research said "the deal makes sense" given that PLX's core product, PCIe, has become companies' de facto standard to connect server-side flash and PLX has a 70 percent market share.

PLX's largest shareholder, Potomac Capital, along with members of PLX's management and all of its directors agreed to support the transaction. Together these holders account for a 14.7 percent stake in PLX.

Additionally, Discovery Group, the second-largest shareholder, supports the deal, according to PLX.

The transaction is expected to close in Avago's fiscal fourth quarter ending November 3, and is valued at $293 million net of cash and acquired debt, the companies said.

PLX traded recently up 8.9 percent to $6.47. Avago was down 0.62 percent at $71.12.

Latest Ratings for AVGO

DateFirmActionFromTo
Dec 2014BarclaysMaintainsOverweight
Dec 2014Morgan StanleyMaintainsOverweight
Dec 2014BarclaysMaintainsOverweight

View More Analyst Ratings for AVGO
View the Latest Analyst Ratings

Posted-In: Srini Nandury Sterne Agee Summit Research Vijay RakeshAnalyst Color News M&A Analyst Ratings

 

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