Avago Technologies approaching deal to acquire Broadcom Corp: reports

Avago Technologies Ltd is reported to be in talks to acquire Broadcom Corp, Bloomberg reported citing informed sources.

If a deal were to materialise, it would be the biggest transaction in the semiconductor industry.

A formal announcement could be made as early as today, according to the people, who asked not to be identified as the discussions were private.

While no agreement had been reached, the talks could end without a deal, according to the people. Broadcom shot up 22 per cent per cent on the news to a market value of about $34.2 billion.

An acquisition by Avago would come as the latest as the $300-billion industry responds to the rising costs of production with consolidation. Singapore-based Avago had been  leading the consolidation wave with several acquisitions, including its $5.6-billion purchase of LSI Corp at the end of 2013.

 ''Semiconductors is a game of scale,'' said Chris Rolland, an analyst at FBR Capital Markets in New York, Bloomberg reported. ''This is going to continue. But we are at the peak in terms of speed of consolidation.''

Irvine, California-based Broadcom's semiconductors power a variety of products, including set-top boxes, cell phones and network equipment.

The company is best known for its connectivity chips which integrate Wi-Fi and Bluetooth technology, widely used in top-tier smartphones made by Apple Inc and Samsung Electronics Co Ltd.

After it lost ground to Qualcomm Inc in modem technology in phones, Broadcom closed down that unit and cut a fifth of its workforce last year.

According to commentators, Avago could now seek to capitalise on synergies with Broadcom's storage business.

Avago had been looking to acquire a large chipmaker, Reuters reported this month, and had approached companies including Xilinx Inc, Japan's Renesas Electronics Corp and Maxim Integrated Products Inc.

Avago, which makes devices for the wireless and industrial markets, had been looking at expansion in areas ranging from analog semiconductors to radio frequency technology.

The company bid for Freescale Semiconductor Ltd earlier this year, before it was bought for NXP Semiconductors NV for $11.8 billion.

Worldwide semiconductor M&A had touched $31 billion last year, the most since 2011, according to Thomson Reuters data.