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Avago Nears Deal for Broadcom

Avago has been shopping around for a fellow chip maker.

Ken Wolter / Shutterstock

Avago Technologies is close to an agreement to acquire fellow chip maker Broadcom, people familiar with the matter said on Wednesday, in a deal that could boost Avago’s clientele of top-tier smartphone companies.

A deal between Avago and Broadcom could come as early as this week, the people said, cautioning that the negotiations had not yet been finalized. The companies did not immediately respond to requests for comment.

Shares of Broadcom soared almost 20 percent to $56.40, while Avago’s rose 9 percent to $143.29 on Wednesday afternoon after the Wall Street Journal first reported on the news. Avago and Broadcom now have market capitalizations of $36 billion and $34 billion respectively.

Irvine, Calif.-based Broadcom makes semiconductors for a variety of products, including set-top boxes, cell phones and network equipment. It is best known for its connectivity chips which integrate Wi-Fi and Bluetooth technology, which are used widely in top-tier smartphones made by Apple and Samsung.

After losing ground to Qualcomm in modem technology in phones, Broadcom shut down that unit and cut a fifth of its workforce last year. Avago could now seek to capitalize on synergies with Broadcom’s storage business.

Avago had been seeking to buy a large chip maker, Reuters reported this month, and approached companies including Xilinx, Japan’s Renesas Electronics and Maxim Integrated Products.

Avago, which develops semiconductor devices for the wireless and industrial markets, has been looking at expanding in areas ranging from analog semiconductors to radio frequency technology.

The company bid for Freescale Semiconductor earlier this year, before NXP Semiconductors bought it for $11.8 billion.

Worldwide semiconductor M&A reached $31 billion last year, the most since 2011, according to Thomson Reuters data.

(Reporting by Greg Roumeliotis in New York; Additional reporting by Liana B. Baker in New York and Sai Sachin R and Anya George Tharakan in Bangalore; Editing by Christian Plumb)

This article originally appeared on Recode.net.

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