On August 8, leading semiconductor company Broadcom (AVGO) agreed to acquire Symantec’s Enterprise Security Business for $10.7 billion. This acquisition should help Broadcom expand into enterprise software. It should also help the company gain traction in the cybersecurity business.
Broadcom has a history of growing via acquisitions. Over the past few years, it acquired Brocade Communications and CA Technologies. Broadcom CEO Hock Tan stated, “Symantec’s enterprise security business is recognized as an established leader in the growing enterprise security space and has developed some of the world’s most powerful defense solutions that protect against today’s evolving threat landscape and secure data from endpoint to cloud. We look forward to expanding our footprint of mission critical infrastructure software within our core Global 2000 customer base.”
AVGO expects the Symantec acquisition to help it target the $161 billion enterprise security market.
The acquisition will be an all-cash deal. Broadcom will be raising debt to finance this acquisition, which is expected close in the first quarter of 2020. The company remains committed to paying 50.0% of its free cash flow to shareholders as dividends. But it will also look to pay back debt instead of using the cash for share repurchases.
AVGO expects the acquisition to result in an incremental annual run rate of $2 billion. It expects to generate cost savings of $1 billion in the first year after the acquisition completes. SYMC generated sales of $4.76 billion in fiscal 2019.
Symantec shares gained 12.3% today on news that acquisition talks were in advanced stages. The deal was announced after the market closed. Symantec shares gained another 3.0% in after-hours trading. Shares of Broadcom were up 0.3% in market hours, and they gained 0.4% after-hours.
Plans to acquire Symantec as a whole were first announced on July 3. However, two weeks ago, the talks reportedly came to a standstill, driving Symantec’s stock lower. Now, with the deal back on track, Broadcom yet again plans to diversify its product portfolio.
Symantec, though, has been struggling to improve its top line for several quarters. The company has lost market share in its Worldwide Security Appliance segment. It competes with tech giants Cisco, Palo Alto Networks, and Fortinet. Now, with the acquisition in its final stages, how will Broadcom look to improve Symantec’s top line?
Correction: The headline of an earlier version of this post suggested that Broadcom was acquiring Symantec as a whole.