QCOM QUALCOMM Inc

By Dana Cimilluca and Dana Mattioli 

Broadcom Inc. is nearing a deal to buy software company CA Technologies for more than $18 billion, according to people familiar with the matter, a surprise move that would take the chip-making giant in a new direction.

Broadcom is to pay $44.50 a share for CA, formerly known as Computer Associates, the people said. Assuming it doesn't fall apart at the last minute, the deal could be announced later Wednesday. CA shares closed at $37.21 Wednesday, meaning Broadcom would pay about a 20% premium.

The takeover would be a major strategic move for Broadcom, coming just months after its $117 billion-plus hostile bid for Qualcomm Inc. was blocked by President Donald Trump.

The impending deal took some industry watchers by surprise, given that it represents expansion into a whole new area for Broadcom, which has become a semiconductor powerhouse largely through acquisitions. CA, based in New York, produces software used in corporate IT infrastructure like mainframe computers.

Broadcom shares, which were down 2.8% in regular trading, fell another 5.2% after hours after The Wall Street Journal reported on the deal. The company's market value stood at $108 billion at the close of trading. Shares of CA, which have risen steadily in recent years, jumped 16% to $43.10 after hours.

Broadcom walked away from its pursuit of Qualcomm in March after the U.S. panel that vets foreign deals said that the bid could have implications for the U.S.'s broader technological competition with China. That panel, the Committee on Foreign Investment in the U.S., or CFIUS, said it was worried that Broadcom would stymie research and development at Qualcomm given its reputation as a cost-cutting behemoth. CFIUS said such a move could weaken Qualcomm -- and thereby the U.S. -- against foreign rivals racing to develop next-generation wireless technology known as 5G, such as China's Huawei Technologies Co.

Broadcom, which launched its hostile bid for Qualcomm in November in what would have been the technology industry's biggest-ever deal, was working to redomicile in the U.S. from Singapore to evade the panel's review. But the presidential order effectively ended its hopes of clinching the deal.

Broadcom completed the move the next month and is now based in San Jose, Calif.

Qualcomm had resisted Broadcom's advances, arguing among other things that the company wasn't offering enough. CFIUS's decision to review Broadcom's proposed bid came just days before Qualcomm shareholders were set to vote on whether to replace six of the company's 11 directors with nominees put forward by Broadcom, a result that could have helped Broadcom achieve the takeover.

Broadcom was known as Avago Technologies Ltd. before Avago bought Broadcom in 2016 for roughly $37 billion in cash and stock. Avago went public in 2009 after incorporating in Singapore, which is known for having a low corporate tax rate.

(END) Dow Jones Newswires

July 11, 2018 17:57 ET (21:57 GMT)

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