Silver Lake backs $6.6bn tech deal

The firm will invest $1bn to support Singaporean Avago Technologies in its takeover of LSI.

Private equity firm Silver Lake Partners has agreed to invest $1 billion in Singapore-based Avago Technologies, ahead of the company’s intended $6.6 billion takeover of NASDAQ-listed storage chip maker LSI Corporation, according to a joint company statement.

Avago, which is also currently listed on the NASDAQ, will acquire LSI for $11.15 per share in an all-cash transaction, which values the company at $6.6 billion.

The company, which produces semiconductor devices, plans to finance the deal with $1 billion in cash from its balance sheet, a $4.6 billion term loan from a group of unnamed banks, and Silver Lake’s $1 billion investment.

The private equity investment is expected to be in the form of a seven year 2 percent convertible note, with a conversion price of $48.04 per share or preferred stock with equivalent economic terms.

The acquisition is intended to create a highly diversified semiconductor business, with approximately $5 billion in annual revenues, the statement said.

Silver Lake invests heavily in technology companies and in October this year completed the notorious $24.9 billion buyout of Dell Computers, after talks that had been on-going since February.

The firm’s initial bid was only the first step in a prolonged process that saw rival proposals from The Blackstone Group and activist investor Carl Icahn.

Silver Lake was also an investor in online voice-over-IP and instant messaging service, Skype, which it bought in 2009 to later sell to Microsoft in an $8.5 billion deal, Private Equity International reported earlier.

In October this year, Silver Lake named Mark Gillett, Microsoft’s corporate vice president for Skype and Lync, as its next head of value creation. The appointment marked a return to Silver Lake for Gillett, who joined the firm in 2009 from Alvarez & Marsal and led value creation in Europe.

Shortly after Silver Lake acquired Skype in September 2009, Gillett left to become Skype’s chief transformation officer. He later transitioned to chief development and chief operating officer.