Avago to Acquire PCIe Specialist PLX for $309 Million

Avago Technologies Limited and PLX Technology, Inc. have entered into a definitive agreement under which Avago will acquire PLX, in PCIe silicon and software connectivity solutions, in an all-cash transaction valued at approximately $309 million, or $293 million net of cash and debt acquired.

Under the terms of the agreement, which was approved by the boards of directors of both companies, a subsidiary of Avago will commence a tender offer for all of the outstanding shares of PLX common stock for $6.50 per share in cash. Avago expects to fund the transaction with cash available on its balance sheet.

“The core PLX PCIe silicon business fits very well with the Avago business model and broadens Avago’s portfolio serving the enterprise storage and networking end markets,” stated Hock Tan, president and CEO, Avago. “Following the closing of the transaction, we are excited to welcome the PLX team to Avago, and we are committed to continue to invest in the PLX PCIe platform.”

“Once closed, this transaction will provide immediate value to our stockholders and offers new growth opportunities for our employees to develop solutions for our customers,” said David Raun, president and CEO, PLX. “Following the closing of the transaction, we believe the combination with Avago is an excellent match for our leading PCIe portfolio supporting next generation data center architectures.”

The transaction is expected to be immediately accretive to Avago’s non-GAAP earnings per share. Avago currently anticipates driving the PLX business model to a level consistent with Avago’s long term business model by the end of fiscal year 2015, the first full fiscal year after closing.

Potomac Capital Partners II, L.P., which is the largest stockholder of PLX, certain senior members of the PLX management team and all of the directors of PLX, collectively owning approximately 14.7% of shares outstanding on fully diluted basis have executed a Tender and Support Agreement in support of the transaction. Discovery Group I, LLC, the second largest stockholder of PLX, has informed PLX that it supports the transaction.

The transaction is subject to customary closing conditions, including the tender into the offer by PLX stockholders of shares representing at least a majority of the outstanding shares of PLX common stock on a fully diluted basis, and the receipt of relevant regulatory approvals, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and relevant foreign antitrust laws.

It is expected that the transaction will close in the fourth quarter of Avago’s fiscal year ending November 3, 2014.

Comments

Practically unknown in the storage industry few months ago, Avago is recently very active and can now be considered as a big name in this business.

It completed the acquisition of LSI last month for $6.6 billion, then sold its LSI flash businesses to Seagate for $450 million, and now is getting PLX for $309 million.

In 2013, PLX was not far to be acquired by Integrated Device Technology but finally the two companies "mutually" agreed to terminate their merger agreement pursuant.

Born in 1986 and becoming public in 1997, PLX ((name coming from Programmable Logic eXecution), based in Sunnyvale, CA, developed ICs for system connectivity: PCIe switches and bridges, DAS and NAS SOC and controllers, I/O and USB controllers, but most recently focused on PCIe switches and bridges.

The firm never explodes. For the more recent first quarter ended last March 20014, revenue were only $25 million with $2 million net income. Sales were $105 million for last fiscal year 2013, $100 in 2012. It was $81 million in ... 2006.

In the past PLX acquired:

Teranetics, in 10GbE silicon, in 2010 for $27.6 million,

Oxford Semiconductor, in interconnect technology for CE market, in January 2009 for $16.4 million,

NetChip Technology, in USB-to-PCI bridges, in 2004 for $20 million, and

HiNT, fabless semiconductor supplier of PCI and PCI-X bridge chips, in 2003 for $9 million.

Avago and PLX were already partnering in the past as they team in 2011 to prove PCIe over fiber optics at 64Gb/s.

Big event for PLX was last year the departure of its CEO since 2008, Ralph Schmitt, leaving for OCZ - then acquired by Toshiba - and replaced by Dave Raun, employee of the company since 2004.

We were surprised when $3 billion Singapore-based chip maker Avago acquired $2.2 billion LSI, the most surprising deal of year and probably of the storage history, suspecting big investor Silver Lake was using Avago to integrate LSI, reorganizes it and then offers it to Wall Street to realize once more an excellent financial operation like it did with Seagate and others.

No, Avago, with this PLX acquisition, is demonstrating it wants to be a real force in storage connectivity.