Broadcom is on the brink of finalizing its $61 billion acquisition of VMware, marking the third-largest deal in IT history, trailing only the Dell/EMC and Microsoft/ActiBlizz takeovers, which boasted $67 billion and $68.7 billion price tags, respectively.
Broadcom initiated the acquisition in May 2022, with a targeted completion date set for fiscal 2023. The semiconductor giant is set to fund the purchase using a 50/50 split of cash and its own shares. Under the agreement, VMware shareholders will receive $142.50 in cash or 0.2520 Broadcom shares for each VMware share, representing a substantial 44% premium over VMware’s share price as of May 20, when the deal was first reported. Moreover, it is 32% higher than VMware’s weighted average 30-day share price.
The combined value of the Broadcom and VMware deal, reportedly $69 billion when factoring in $8 billion of VMware debt that Broadcom will assume, underscores its significance in the tech world.
In a recent statement on October 30, Broadcom affirmed its commitment to finalize the agreement with VMware by the November 26 deadline. The statement aims to allay concerns of potential delays due to Chinese regulators’ scrutiny. While the EU, the UK, and numerous other countries have already granted regulatory approvals, the Chinese regulator’s green light is the final major obstacle.
However, the official stats don’t provide specific updates on the progress of obtaining Chinese regulatory approvals. Reports from earlier this month indicated that heightened U.S. sanctions on chip exports might prolong the Chinese approval process, causing VMware shares to dip below the offer.
The significance of this deal cannot be understated. Not only does it rank as the third-largest IT deal in history, but it also promises to transform Broadcom’s software business and bolster its position in the networking and storage markets. This acquisition underscores Broadcom’s aggressive acquisition strategy, as seen in past purchases, including CA Technologies for $18.9 billion in 2018 and the acquisition of Symantec’s business for $10.7 billion in 2019, followed by a resale to Accenture. Notably, Broadcom’s efforts to acquire rival Qualcomm were thwarted due to national security concerns. As the deal with VMware nears its final stages, the tech industry watches with bated breath to see how this acquisition will reshape the industry’s landscape.
