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CARRIE – Tech giant Broadcom is in talks to buy SAS, a private company, according to a Wall Street Journal article. The deal could cost SAS up to $ 20 billion.
The global software company is privately owned by billionaire owners Jim Goodnight, who owns the majority of the business, and John Sall. SAS is profitable, generating some $ 3 billion in revenue per year.
SAS is constantly the subject of buyout talks, including a rumored buyout by IBM a decade ago. But the company declined to talk about the Broadcom report.
“SAS does not comment on rumors or speculation,” said Shannon Heath, spokesperson for SAS. “SAS remains focused on the pursuit of innovation to better serve our customers. “
Earlier this year, rumors were circulating inside and outside SAS about possible deals with Microsoft or IBM. Microsoft has deepened its partnership with SAS on several fronts, such as cloud computing. SAS generally ignores or does not comment on rumors and speculation.
Interestingly, Goodnight once said he would sell the company for $ 20 billion.
In an interview with Business Week in 2009, Goodnight said inquiries about the SAS acquisition continued as consolidation swept through the business intelligence industry.
“Two big companies asked me if we would sell, and I said, ‘Yeah, for $ 20 billion,’ Goodnight said.
Flash forward until today.
If Goodnight sells SAS, this is the company it should sell to …
SAS could bring in up to $ 15 to $ 20 billion. A deal for that much money is no stranger to Broadcom executives.
Could Broadcom strike a deal?
Big question: Does Broadcom have the financial strength to make such a big deal?
“Broadcom appears to have the resources, the financial capability and the business profile to acquire SAS,” says economist Mike Walden, who recently retired from a teaching position at NC State but remains very active in research. and writing.
Even at $ 20 billion, such a deal would be less than IBM’s $ 34 billion purchase of Red Hat three years ago.
What if a deal comes up? Walden sees good and bad possibilities for the Triangle.
“The big question is whether the new owners would relocate some or all of SAS’s employees and operations. Otherwise, the potential negative impact is minor, and perhaps the sale could even be a plus with an injection of new capital, markets and complementary operations, ”warns Walden. “But if a significant part of SAS eventually leaves the region – without being a devastating blow – it would be a setback for the region. SAS is a local company and this had a big impact on the transformation of the Triangle into a national technology center. “
Background
The business has also remained profitable for 45 years, dating back to its founding in the days of Goodnight and Sall as educators at NC State. A recently launched marketing campaign can also add momentum forward.
Broadcom (Nasdaq: AVGO) is primarily a semiconductor company, but has branched out into software under the leadership of CEO Hock Tan. And Barron’s notes that the company’s software “operations took off in 2015 with the $ 37 billion merger” with Avago.
The state of the SAS: After 5 years of stable sales, growth could return in 2021
“In 2018, he struck an approximately $ 19 billion deal to buy software company CA Technologies, formerly Computer Associates,” the Journal reported. “The following year, Broadcom agreed to buy the business operations of Symantec Corp. for about $ 10.7 billion.
The newspaper cited “people familiar with the matter” who were not named.
A deal “could be finalized in the coming weeks,” added the WSJ.
In Broadcom’s playbook
“The deal fits perfectly into Broadcom’s playbook,” Barron’s reports. “Over the past few years the tech giant has made acquisitions to reduce costs and generate cash flow, Charles Lemonides, chief investment officer at ValueWorks.”
But he added in a note of concern to SAS employees:
“He’s not driving growth from the companies he acquired five and seven years ago because that tends to drain them,” Lemonides said.
Broadcom has a current market value of around $ 200 billion, based on its share price.
Its website describes Broadcom as “a global technology leader that designs, develops and delivers a broad range of semiconductor and infrastructure software solutions. Broadcom’s industry-leading product portfolio serves critical markets including data centers, networking, enterprise software, broadband, wireless, storage and industry. Our solutions include data center networking and storage, enterprise, mainframe and cybersecurity software focused on automation, surveillance and security, components for smartphones, telecommunications and security. factory automation.
The company moved its headquarters to the United States from Singapore in 2018.
If Broadcom were to make the purchase, Barron’s said the company would likely use stocks, not cash. Broadcom stock recently climbed amid the global semiconductor shortage. In addition, Broadcom has approximately $ 40 billion in debt, Barron’s added.
SAS, in partnership with Microsoft, to work with Red Hat, projects growth in 2021
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