Broadcom is on the brink of finalizing its colossal $61 billion acquisition of VMware, marking the third-largest deal in IT history, only surpassed by Dell’s $67 billion EMC takeover and Microsoft’s $68.7 billion acquisition of Activision Blizzard.
Broadcom initiated the acquisition of VMware in May 2022, with intentions to complete the deal in fiscal 2023. The US semiconductor behemoth plans to fund the purchase through a 50/50 combination of cash and its own shares. Under the agreement’s terms, VMware shareholders will receive either $142.50 in cash or 0.2520 Broadcom shares for each VMware share they hold, a deal that has surged 44% above VMware’s share price as of May 20 when news of the potential agreement surfaced. Furthermore, it is a remarkable 32% higher than VMware’s weighted average share price over 30 days (VWAP). When assessing the deal’s value, it closely trails the current record-setters: Dell’s $67 billion EMC deal and Microsoft’s $68.7 billion acquisition of Activision Blizzard. Some reports even cite a deal value of $69 billion, accounting for an additional $8 billion of net VMware debt that Broadcom is poised to undertake.
On October 30, Broadcom issued a statement affirming its imminent completion of the VMware acquisition, further emphasizing its commitment to meet the November 26 deadline. This assurance comes as Broadcom seeks to allay investor concerns regarding any potential delays stemming from Chinese regulatory approvals. While Broadcom has secured clearances from regulatory bodies in the EU, the UK, and various countries, approval from Chinese regulators stands as the final significant obstacle to closing the deal.
Curiously, official data offers no insights into the specifics of the progress made with Chinese regulators. Recent reports by the Financial Times suggest that China’s antitrust authorities might extend the approval process due to heightened US sanctions on chip exports. Consequently, VMware shares have dipped below the offer price in response to these uncertainties.
The magnitude of this deal extends beyond its financial size. Broadcom’s acquisition of VMware, the leading virtualization software vendor, previously owned by Dell prior to its 2021 spin-off, ranks as the third most valuable transaction in IT history. The ramifications of this acquisition are poised to reverberate through Broadcom and the industry at large, as it is expected to turbocharge the semiconductor giant’s software business and reinforce its presence in the networking and storage sectors.
This landmark transaction is also part of a broader narrative of Broadcom’s consistent acquisition spree. Over the years, the company acquired key players such as CA Technologies for $18.9 billion, Symantec’s business for $10.7 billion (later resold to Accenture), and even attempted to acquire rival Qualcomm, albeit foiled by national security concerns.
As the deal enters its final stages, all eyes are on the potential transformation it could usher in the world of technology and semiconductor manufacturing.