4:00 PM New York – Avago Technologies open flood gates of fees and returns to private equity investors. The pricey offering values the company at 42 times 2008 earnings and may not bring rich rewards to investors in the public offering. The debt laden company has struggled with profitability in the last four years.

Avago Technologies Ltd priced 43.2 million shares in public offering at $15 each. The technology company shares traded as high as $16.76 on its second day of trading.

The company offered 21.5 million shares and private equity shareholders sold 14.5 million shares in the offering.

The Singapore based semiconductor company was spun off with Agilent Technologies from Hewlett Packard in 1999 in public offering that raised $2.1 billion.

The semiconductor company was later sold in 2005 to Kohlberg Kravis Roberts & Company and Silver Lake Partners for $2.7 billion. The public offering valued the company at $3.5 billion.

Since then the company has acquired five companies for $110 million between 2007 and 2008. The company also sold five businesses that generated at least $720 million.

For the fiscal year ended November 2, 2008 and the six months ended May 3, 2009,the company generated net revenues from continuing operations of $1.7 billion and $693 million, respectively, and net income of $83 million and loss of $25 million, respectively.

Based on the historical earnings the deal is priced at 42 times 2008 earnings. The company has approximately $700 million of debt outstanding with interest rates between 10.125% and 11.785%.

Wireless communications customers represented 38% of the revenues in the first half of the current fiscal year and wired infrastructure 28%.

As a percentage of revenues, research and development expenses were flat 14% in the first half of the year.

The company plans to use the proceeds of offering to repay $226 million in debt and $53 million to selling shareholders to terminate the advisory agreements.

The worldwide analog semiconductors industry generated $60 billion in sales in 2008.

Entities affiliated with KKR and Silver Lake Partners purchased shares in the company at $5 a share and paid in aggregate of $1.05 billion and for convertible preference shares for $250 million. The rest of $2.7 purchase price was financed by loading debt on the company balance sheet.

The preference shares were redeemed by adding debt to the company after few months of acquisition.

The company has also paid $19 million in advisory fees to the entities affiliated with the private equity groups Silver Lake and KKR in the last three years.

With the completion of the deal, private equity holders will receive approximately $225 million from public offering proceeds, $53 million in termination fees, $19 million in advisory fees over the last three years and still retail 65% stake in the company.

Deutsche Bank, Barclays Capital, Morgan Stanley and Citigroup acted as joint lead managers for the deal.