CARY – Tech giant Broadcom is in talks to buy privately held SAS, according to a report in The Wall Street Journal. The deal could value SAS as much as $20 billion.
The global software company is privately held by billionaire owners Jim Goodnight, who owns a majority of the firm, and John Sall. SAS is profitable, generating some $3 billion a year in revenue.
SAS is constantly the subject of buyout talks, included a rumored takeover by IBM a decade ago. But the company declined to talk about the Broadcom report.
“SAS does not comment on rumors or speculation,” said SAS spokesperson Shannon Heath. “SAS remains focused on furthering innovation to best serve our customers.”
Earlier this year rumors were flying inside and outside SAS about possible deals with Microsoft or IBM. Microsoft did deepen its partnership with SAS on a number of different fronts, such as cloud computing. SAS generally ignores or won’t comment about rumors and speculation.
Interestingly, Goodnight once said he’d sell the company – for $20 billion.
In a 2009 Business Week interview, Goodnight said inquiries about acquiring SAS continued as consolidation swept through the business intelligence sector.
“I’ve been asked by two major companies if we’d sell, and I said, ‘Yes, for $20 billion,’” Goodnight said.
Flash forward to today.
SAS could bring as much as $15 billion to $20 billion. A deal for that much money is not unfamiliar to Broadcom leadership.
Could Broadcom pull off a deal?
A big question: Does Broadcom have the financial muscle to make such a big deal?
“Broadcom appears to have the resources, financial ability, and business profile needed to acquire SAS,” says economist Dr. Mike Walden who recently retired from a teaching role at N.C. State but remains very active in research and writing.
Even at $20 billion such a deal would fall short of IBM’s $34 billion buy of Red Hat three years ago.
And if a deal were to happen? Walden sees good and bad possibilities for the Triangle.
“The big question is, would the new owners move some or all of SAS’s employees and operations. If not, then the potential adverse impact is minor, and perhaps the sale could even be a plus with an infusion of new capital, markets, and complementary operations,” Walden warns. “But if a sizable part of SAS ultimately leaves the area – while not a devastating blow – it would be a setback to the region. SAS is home-grown, and it had a big impact on making the Triangle a national tech center.”
The company also has remained profitable for 45 years, dating back to its founding in the days of Goodnight and Sall as educators at N.C. State. A recently launched marketing campaign also may add to the forward momentum.
Broadcom (Nasdaq: AVGO) s primarily a semiconductor firm but has been diversifiying into software under CEO Hock Tan. And Barron’s notes that the firm’s software “operations took off in 2015 with the $37 billion merger” with Avago.
“In 2018, he struck a roughly $19 billion deal to buy software firm CA Technologies, formerly Computer Associates,” the Journal reported. “The following year, Broadcom agreed to buy Symantec Corp.’s enterprise business for roughly $10.7 billion.
The newspaper cited “people familiar with the matter” who were unnamed.
A deal “could be finalized in the coming weeks,” the WSJ added.
In Broadcom’s playbook
“The deal fits neatly into Broadcom’s playbook,” reports Barron’s. “In the past few years, the tech giant has made acquisitions to carve out costs and generate cash flow, Charles Lemonides, chief investment officer at ValueWorks.”
But he added in an ominous note for SAS employees:
“It doesn’t get growth from business it acquired five and seven years ago because it tends to hollow them out,” Lemonides said.
Broadcom has a current market value of some $200 billion, based on its stock price.
Its website describes Broadcom as “a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. Broadcom’s category-leading product portfolio serves critical markets including data center, networking, enterprise software, broadband, wireless, storage and industrial. Our solutions include data center networking and storage, enterprise, mainframe and cyber security software focused on automation, monitoring and security, smartphone components, telecoms and factory automation.”
The company moved its headquarters to the US from Singapore in 2018.
If Broadcom were to make the buy, Barron’s says the firm is likely to use stock – not cash. Broadcom stock has climbed recently amid the global semiconductor shortage. Plus Broadcom is carrying some $40 billion in debt, Barron’s added.