Avago's PLX Buyout 'Makes Sense' Say Analysts

PLX Technology Inc.

will be acquired for $309 million by Avago Technologies Ltd.

. Terms of the deal, approved by both companies' boards, call for Avago to launch a $6.50 a 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 maintainsa 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 managment 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 Nov. 3, and is valued at $293 million net of cash and acquired debt, the companies said. PLX traded recently up 9.09 percent to $6.48. Avago was off 0.62 percent at $71.12.