Broadcom in Talks to Buy SAS Institute for as Much as $20 Billion: Report

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Broadcom is looking to grow its endeavor bundle concern by acquiring SAS, according to The Wall Street Journal.

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Broadcom is successful talks to bargain endeavor bundle institution SAS Institute for arsenic overmuch arsenic $20 billion, The Wall Street Journal reported connected Monday.

In day trading, shares of Broadcom (ticker: AVGO) were up 0.7% to $83.55.

Broadcom, a semiconductor and infrastructure bundle heavyweight, would beryllium doubling down connected its already sizable endeavor bundle concern if it acquires SAS for $15 cardinal to $20 billion, radical acquainted with the negotiations told the Journal. That limb of the company’s operations took disconnected successful 2015 with the $37 cardinal merger of Avago and Broadcom.

SAS generated $3 cardinal successful gross past year, according to the company’s yearly report; a $15 billion-to-$20 cardinal woody suggests a valuation of astir 5 to 6.7 times 2020 revenue.

The $15 billion-to-$20 cardinal woody terms is based connected the endeavor worth of SAS, which typically includes debt, and is adjusted for currency successful a businesses’ fiscal statements, sources told the Journal.

Broadcom and SAS didn’t respond to a petition for remark from Barron’s. 

North Carolina-based SAS sells a scope of endeavor software, including customer-intelligence and visual-analytics products. Banking accounts for not rather a third—30%— of the company’s bundle revenue, according to the yearly report. Government accounts for 17% and security amounting to 11%.

SAS was founded astir 40 years agone by Jim Goodnight and John Sall. The men inactive tally the company, which present has 12,545 employees.

The woody fits neatly into Broadcom’s playbook. In the past fewer years, the tech elephantine has made acquisitions to carve retired costs and make currency flow, Charles Lemonides, main concern serviceman astatine ValueWorks, told Barron’s.

“It doesn’t get maturation from concern it acquired 5 and 7 years agone due to the fact that it tends to hollow them out,” helium said.

Broadcom is apt to usage its banal to bargain SAS if the woody goes through. In portion due to the fact that of the surge successful planetary request for chips, the banal has gained astir 52% successful the past year, arsenic the PHLX Semiconductor index, oregon Sox, roseate 60%. And the institution has astir $40 cardinal successful indebtedness connected its equilibrium sheet, which suggests it astir apt wouldn’t get wealth to implicit an acquisition.

Broadcom has importantly expanded its portfolio of subsidiary companies nether main enforcement Hock Tan, who was Avago’s CEO. After buying bundle CA Technologies for $19 cardinal successful 2018, Broadcom acquired Symantec ‘s endeavor information concern for astir $10 billion. Broadcom besides made a failed bid for Qualcomm (QCOM) successful 2018, and bought Argon Design for $1 cardinal successful 2019.

Write to Max A. Cherney astatine max.cherney@barrons.com

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