Broadcom is set to acquire Symantec's enterprise security business for $10.7 billion in cash, with the transaction expected to close in the first quarter of Broadcom's fiscal year 2020.
Broadcom is a technology company that designs, develops and supplies semiconductor and infrastructure software solutions.
The addition of Symantec's enterprise security portfolio will enable the company to expand its software offering and continue to grow as an infrastructure technology company, according to a statement.
Broadcom president and chief executive officer Hock Tan says, “M-A has played a central role in Broadcom's growth strategy and this transaction represents the next logical step in our strategy following our acquisitions of Brocade and CA Technologies.
Tan says, “Symantec's enterprise security business is recognised 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.
Symantec's enterprise security business offers its customers a portfolio of integrated enterprise security solutions with product lines across endpoint security, web security services, cloud security and data loss prevention.
According to the company, Broadcom will deploy Symantec's enterprise security suite through its. This will add to its differentiated portfolio license agreement (PLA) strategy.
Broadcom hopes this will offer savings to customers and create a predictable, recurring revenue stream for its business that will, in turn, drive returns for shareholders.
According to Broadcom, the transaction is expected to drive more than $2 billion of sustainable, incremental, run-rate revenues and approximately $1.3 billion of Pro Forma EBITDA, including synergies.
The transaction is expected to generate more than $1 billion of run-rate cost synergies within 12 months following close. Additionally, Broadcom expects to achieve double-digit cash-on-cash returns on its investment.
Under the terms of the asset purchase agreement, which has been approved by the Broadcom Board of Directors, Broadcom will pay Symantec $10.7 billion in cash at closing. Broadcom intends to fund the transaction with proceeds from new committed debt financing, the company says.
Broadcom expects its current dividend policy of delivering 50% of its prior fiscal year free cash flow to shareholders to remain unchanged.
However, Broadcom now intends to use excess cash flow beyond its dividend payments to pay down debt as opposed to stock repurchases, the company says.
According to a statement, Broadcom believes access to the investment grade credit market is fundamental to its strategy and fully intends to maintain its investment grade credit rating.
The transaction is subject to regulatory approvals in the U.S., EU and Japan and other customary closing conditions.
Following the closing of the transaction, Broadcom will own and incorporate the Symantec brand name into the Broadcom portfolio.