Wall Street Unimpressed by Broadcom's Latest M&A Deal

Broadcom's stock price tumbled Thursday after the chipmaker announced its latest acquisition bid, an $18.9 billion offer to buy an established vendor in the seemingly unrelated field of IT management software.

Broadcom (San Jose, Calif.) said it signed a definitive agreement to acquire CA Technologies in a cash deal that gives CA Technologies a 20% premium over its closing stock price Wednesday. The deal is expected to close in the fourth quarter, Broadcom said.

Broadcom has grown substantially in recent years, largely through acquisition of other chip companies, including the $37 billion merger of Avago and Broadcom in 2015. A $105 billion hostile bid to acquire Qualcomm was blocked earlier this year by U.S. President Donald Trump on national security grounds.

But analysts have expressed concern that the acquisition of CA Technologies offers no synergies with Broadcom's existing chip businesses and doesn't align with the company's core strategy. Broadcom's stock price declined by 15% Thursday morning in the wake of the announcement.

Tan said Broadcom would continue to strengthen CA Technologies businesses to meet the growing demand for infrastructure software solutions.