Apple Supplier Avago (AVGO) the Real Winner in PLX (PLXT) Acquisition

June 23, 2014 • Top News • Tags: ,

Chipmaker Avago Technologies announced today that it will acquire PLX Technolgoy, a semiconductor manufacturer, for $309M in cash. PLX shareholders will receive $6.50/share, a premium less than 10% to market. The acquisition will give Avago additional expertise in enterprise storage and wired infrastructure due to PLX’s market leading position. PLXT is up 9%.

At the start of 2014, PLX was trading near the buyout price ($6.50) but has since dropped to mid $5s due to heavier short selling. The company’s earnings have not given any reason for the pessimism due to results being in line or above estimates. Yet, short interest has doubled in 2014 causing selling pressure on the stock and thus resulting in lower pricing.

PLXT Short interest

 

Many of PLX’s newer shareholders have not seen the green that generally accompanies acquisition targets. The growing numbers of PLX short sellers have also lost out due to the deal. For Avago, purchase of PLX is an under the radar move that will be immediately accretive to its operations and expand product offering. The best part is the discount at which PLX was acquired; a 9% premium to 60 day moving average.

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