Research Update: Broadcom Inc. Ratings Affirmed On Acquisition Of Symantec's Enterprise Security Business; Outlook Stable

Broadcom Inc. has announced an agreement to acquire the enterprise security business of Symantec Corp. for $10.7 billion in cash, furthering Broadcom's push into the enterprise software business. Although we expect this transaction to increase Broadcom's 2019 adjusted leverage to approximately 3.6x on a pro forma basis, free cash flow generation of over $9 billion should enable the firm to rapidly reduce leverage to at least 3.0x by the end of fiscal 2020. We are affirming all ratings on Broadcom and its debt based on our view that leverage will only briefly remain over 3.5x. Our outlook is stable, reflecting our expectation that consistent free cash flow generation in the firm's core semiconductor franchise will enable Broadcom to rapidly return

...- Broadcom Inc. has announced an agreement to acquire the enterprise security business of Symantec Corp. for $10.7 billion in cash, furthering Broadcom's push into the enterprise software business. - Although we expect this transaction to increase Broadcom's 2019 adjusted leverage to approximately 3.6x on a pro forma basis, free cash flow generation of over $9 billion should enable the firm to rapidly reduce leverage to at least 3.0x by the end of fiscal 2020. - We are affirming all ratings on Broadcom and its debt based on our view that leverage will only briefly remain over 3.5x. - Our outlook is stable, reflecting our expectation that consistent free cash flow generation in the firm's core semiconductor franchise will enable Broadcom to rapidly return leverage to under 3.5x after transaction close. - We also note that this transaction gives Broadcom very little room to pursue additional near-term acquisitions or weather a deeper than expected downturn in its core semiconductor business...

Research Update