Broadcom has plans to be a large technology infrastructure company. CA Technologies will bring recurring software revenue to the party.
Broadcom said it will acquire CA Technologies for $18.9 billion in cash in a move that broadens its reach into the software.
According to Broadcom, CA Technologies will add recurring revenue, make it a larger enterprise player and ultimately a company focused on infrastructure technology.
CA has transformed from a mainframe software company to one focused on DevOps as well as security and building applications.
Broadcom is paying a 20 percent premium from CA's closing price Wednesday. CA shareholder will get $44.50 in cash for each share.
For Broadcom, best known for trying to recently acquire Qualcomm, the CA purchase is a pivot of sorts. Broadcom was mostly focused on data center gear and processors.
With CA in the fold, the new Broadcom will derive 28 percent of revenue from software from nothing today.
Hock Tan, CEO of Broadcom, said CA Technologies will be "an important building block" and the company can utilize a large base of new customers. CA CEO Mike Gregoire said the combination of software and Broadcom's semiconductor knowhow is appealing.
As for the financials, Broadcom said CA Technologies will be accretive to its non-GAAP earnings. The combined company has an annual revenue of $23.9 billion with adjusted EBITDA of $11.6 billion.
Broadcom said the CA purchase is expected to close in the fourth quarter.
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