Robbins Arroyo LLP: Acquisition of Broadcom Corporation (BRCM) by Avago Technologies Limited (AVGO) May Not Be in Shareholders’ Best Interests
Robbins Arroyo LLP is investigating the proposed acquisition of Broadcom Corporation (NASDAQ: BRCM) by Avago Technologies Limited (NASDAQ: AVGO). On May 28, 2015, the two companies announced the signing of a definitive merger agreement pursuant to which Avago will acquire Broadcom. Under the terms of the agreement, Broadcom shareholders will receive $54.50 in cash, 0.4378 shares of the newly-formed company, or a combination thereof, for each share of Broadcom common stock they own.
Is the Proposed Acquisition Best for Broadcom and Its Shareholders?
Robbins Arroyo LLP’s investigation focuses on whether the board of directors at Broadcom is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $54.50 merger consideration represents a discount of -4.6% based on Broadcom’s closing price on May 27, 2015. This discount is significantly below the average one-day premium of nearly 38% for comparable transactions within the past five years. Further, the $54.50 merger consideration is below the target prices set by eleven analysts ranging from $60.00, set by B. Riley & Co. on April 22, 2015, and $55.00 set by FBR Capital Markets on April 22, 2015. Recently, Broadcom traded as high as $57.69 on May 27, 2015.
On April 21, 2015, Broadcom reported strong quarterly earnings results for its first quarter 2015. Net revenue for the first quarter of 2015 was $2.06 billion, an increase of 3.7% from the first quarter of 2014. GAAP net income for the quarter was $209 million, an increase of 27% from the first quarter of 2014. Additionally, Broadcom beat consensus analyst estimates for sales in three out of the past four quarters. In commenting on these results, Broadcom President and Chief Executive Officer Scott McGregor remarked, “Broadcom delivered better-than-expected results in the March quarter driven by strength in the high-end smartphone and broadband access markets. Looking to the June quarter, we see operating performance continuing to strengthen on tight operating expense discipline and strong margins, consistent with our objective of driving profitable growth.”
In light of these facts, Robbins Arroyo LLP is examining Broadcom board of directors’ decision to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
Broadcom shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
Broadcom shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.