Broadcom, the US semiconductor giant, is on the cusp of finalizing its monumental $61 billion acquisition of VMware, marking a historic moment in the IT industry. This impending merger ranks as the third-largest IT deal in history, trailing behind only Dell’s acquisition of EMC for $67 billion and Microsoft’s takeover of Activision Blizzard for $68.7 billion.
The journey to this significant IT milestone began in May 2022 when Broadcom announced its plans to acquire VMware, the market leader in virtualization software. The deal is set to be sealed in fiscal 2023, with Broadcom funding the purchase through a 50/50 split of cash and its own shares.
Under the terms of this colossal deal, VMware shareholders will receive either $142.50 in cash or 0.2520 Broadcom shares for each VMware share they own. This offer represents a 44% premium compared to VMware’s share price as of the announcement back in May and a 32% increase over VMware’s weighted average share price over the preceding 30 days.
Some reports suggest that the deal’s total value could reach $69 billion when factoring in the $8 billion of net VMware debt that Broadcom will assume.
In a recent statement, Broadcom reassured stakeholders that it remains on track to meet the agreement’s deadline, which is set for November 26. The statement aimed to quell concerns of potential delays due to regulatory hurdles, particularly in China. Broadcom has secured approvals from regulatory bodies in the EU, the UK, and several other nations, leaving Chinese regulatory approval as the final significant obstacle to overcome.
Notably, the lack of specific updates on Chinese regulatory approval has caused some uncertainty. Reports have indicated that China’s antitrust regulators may take their time to approve the deal, possibly due to tightening US sanctions on chip exports. As a result of these reports, VMware shares dipped below the deal offer.
The significance of this deal extends beyond its immense financial scale. Broadcom’s acquisition of VMware is expected to propel the semiconductor giant’s software business while strengthening its presence in the networking and storage market. This strategic move underlines Broadcom’s ongoing pattern of acquisitions in recent years, as it continually expands its portfolio and influence within the tech industry.
While the deal is poised to make history for its size, it also holds the potential to reshape the future of Broadcom and have a lasting impact on the broader technology landscape. However, the tech world is closely watching the final approval process, especially in China, as it marks the crucial last step towards this transformative merger.
