- Buying VMW today is equivalent to buying AVGO at the free cash flow yield of 8.5% provided the merger gets closed.
- It is an attractive valuation on both a historic and absolute basis. When a similar valuation was available last time, AVGO generated a 33% return over the next year.
- Broadcom is likely to quickly deleverage within one year of closing the acquisition and be ready for further inorganic growth.
- With half of the revenue from software, Broadcom is expected to deserve higher multiples.
For further details see:
Broadcom Acquires VMware - Make Money Out Of It! Part 2