Photograph by Kris Tripplaar — Sipa USA/AP

Silver Lake helped create Avago, and then bought back in at the perfect time.

By Dan Primack
May 29, 2015

Private equity firm Silver Lake has done the unthinkable. It double-dipped a chip, and is earning big praise rather than scorn.

Ten years ago, Silver Lake and Kohlberg Kravis Robers & Co. KKR partnered to create Avago Technologies, through the purchase of Agilent’s A semiconductor business. They then took the company in public in 2009 and, by 2011,had effectively exited with 5x cash-on-cash returns. Not too shabby, except that Avago’s AVGO stock price at the time was in the $20’s and today it opened trading at $144.50 per share.

The stock boost is largely attributable to Avago’s decision to be a leader in the chip consolidation race, beginning with its $6.6 billion cash purchase of LSI Corp. in late 2013. And then, yesterday, Avago announced that it will acquire rival Broadcom BRCM for $37 billion in cash-and-stock — in which would be the largest ever merger of pure technology companies.

KKR might be regretting its earlier exit, but Silver Lake is continuing to clean up. The latter firm made a $1 billion convertible debt investment into Avago to help finance the LSI purchase. Were Silver Lake to convert its notes at Avago’s current trading price, the stake would be worth approximately $3 billion.

Pretty good year for Silver Lake partner (and Avago director) Ken Hao, who was already riding high from his role in Silver Lake’s Alibaba Group BABA investment. I guess he’s no George Costanza…

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