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EU approves merger of semiconductor manufacturers Avago and Broadcom

The European Commission has given the go-ahead to the $77 billion acquisition of Broadcom by Avago, saying that the merged entity will still face effective competition in Europe. 25 Nov 2015

The two companies manufacture and sell semiconductors internationally. The portfolios of the two companies are complementary, the Commission said, as Broadcom makes off-the-shelf chips for the broadband and connectivity markets while Avago makes custom-built products for special applications in analogue wireless circuits, enterprise, storage and industrial markets.

The Commission did have some concerns about the vertical relationship created by the merger, as Singapore-based Avago supplies intellectual property (IP) to some of US-based Broadcom's competitors in the 'switch chips' market. It would therefore have an incentive to withhold this, to improve its own position in this market. However, the Commission concluded that Avago had addressed this concern by entering into commercial agreements with other manufacturers to ensure they continue to have access to the IP on reasonable terms.

The combined company will have "the most diversified communications platform in the semiconductor industry, with combined annual revenues of approximately $15 billion", the companies said in a statement.

Hock Tan, president of Avago said: "The combination of Avago and Broadcom creates a global diversified leader in wired and wireless communication semiconductors. Avago has established a strong track record of successfully integrating companies onto its platform. Together with Broadcom, we intend to bring the combined company to a level of profitability consistent with Avago's long-term target model."

The combined company will be called Broadcom Limited.

Last month the Commission approved the merger of US semiconductor suppliers Altera and Intel.

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