Avago Technologies Limited and LSI Corporation today announced that they have entered into a definitive agreement under which Avago will acquire LSI for $11.15 per share in an all-cash transaction valued at $6.6 billion.

“This transaction provides immediate value to our stockholders, and offers new growth opportunities for our employees to develop a wider range of leading-edge solutions for customers,” said Abhi Talwalkar, President and Chief Executive Officer of LSI.  “Our positions in enterprise storage and networking, in combination with Avago, create greater scale to further drive innovations into the datacenter.”

The transaction is expected to be significantly and immediately accretive to Avago’s non-GAAP free cash flow and earnings per share. Avago currently anticipates achieving annual cost savings at a run rate of $200 million by the end of the fiscal year ending November 1, 2015, the first full fiscal year after closing.

Under the terms of the agreement, LSI’s stockholders will receive $11.15 in cash for each share of LSI common stock they hold at closing, which is expected to occur during the first half of calendar 2014. Avago intends to fund the transaction with $1.0 billion of cash from the combined balance sheet and fully-committed financing from the following sources:

• A $4.6 billion term loan from a group of banks; and
• A $1 billion investment from Silver Lake Partners, which is expected to be in the form of a seven year 2% convertible note with a conversion price of $48.04 per share or preferred stock with equivalent economic terms.

The transaction has been approved by the boards of directors of both companies and is subject to regulatory approvals in various jurisdictions and customary closing conditions, as well as the approval of LSI’s stockholders.