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Here's How CA, Inc. Shares Surged 24% Higher Last Month

By Anders Bylund - Aug 6, 2018 at 1:46PM

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Semiconductor giant Broadcom is buying the IT management software specialist. Nobody knows exactly why yet, but it's definitely happening.

What happened

Shares of IT management tools provider CA, Inc. (CA) gained 24% in July 2018, according to data from S&P Global Market Intelligence. This is a simple case of semiconductor giant Broadcom (AVGO 4.37%) acquiring CA in an $18.9 billion all-cash buyout deal.

So what

Broadcom is known for its ambition to keep growing by acquisition. The company had some cash burning a hole in its pocket since March, when the Trump administration shut down a $119 billion buyout of fellow chip titan Qualcomm -- by executive order, no less. Pivoting to CA instead, Broadcom hopes to grow its business in a new direction while facing fewer challenges from regulators and the White House.

"This transaction represents an important building block as we create one of the world's leading infrastructure technology companies," said Broadcom CEO Hock Tan in a press release.

Artist painting a mural on a grey concrete wall, depicting a large yellow fish swallowing a smaller yellow fish.

Image source: Getty Images.

Now what

Investors and analysts alike are still scratching their heads over Broadcom's big idea. CA shares are trading a couple of percent below Broadcom's all-cash offer of $44.50 per share and several analyst firms have stated that they want more clarity about Broadcom's long-term plans before they can get behind this deal.

That being said, there's little reason to believe that this acquisition will run into regulatory roadblocks or a thumbs-down vote from CA's shareholders. This looks like a good time to cash in your CA chips and reinvest the gains elsewhere.

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