Broadcom is on the cusp of finalizing its monumental $61 billion acquisition of VMware, marking the third-largest deal in IT history, following in the footsteps of Dell/EMC ($67 billion) and Microsoft/Activision Blizzard ($68.7 billion).
Broadcom announced its intention to acquire VMware back in May 2022, with the aim of sealing the deal within fiscal 2023. The U.S. semiconductor juggernaut will finance this historic takeover through a 50/50 split between cash and its own shares. Under the agreement’s terms, VMware shareholders are poised to receive either $142.50 in cash or 0.2520 Broadcom shares for each VMware share. This offer represents a substantial 44% increase over VMware’s share price as of May 20 when the news of the potential deal first surfaced in the media. Furthermore, it stands 32% higher than VMware’s weighted average 30-day share price (VWAP). In terms of sheer value, the Broadcom-VMware deal falls just short of the current record holders, Dell and EMC’s $67 billion merger and Microsoft’s acquisition of Activision Blizzard for $68.7 billion. Some sources are even quoting a total deal value of $69 billion, factoring in an additional $8 billion in net VMware debt that Broadcom will assume.
A recent statement by Broadcom on October 30 assured investors that the agreement with VMware would be completed shortly, and the company remains committed to meeting the November 26 deadline for the deal. This statement is primarily aimed at allaying any concerns of potential delays arising from Chinese regulators’ involvement. Notably, Broadcom has already secured approvals from regulators in the European Union, the United Kingdom, and several other countries. The final significant hurdle that stands in the way of closing the deal is the approval from Chinese regulators.
It’s interesting to note that the official statistics provided by the parties involved do not disclose any specifics regarding the progress of Chinese regulator approvals. Reports from earlier this month suggested that China’s antitrust regulators might take longer to greenlight the deal, partly due to the tightening of U.S. sanctions on chip exports. As a consequence of this news, VMware shares dipped below the deal offer.
This landmark deal’s significance goes beyond its financial magnitude. The acquisition is poised to have a substantial impact on Broadcom’s future, substantially boosting the semiconductor giant’s software business while strengthening its position in the networking and storage market.
The historical context of Broadcom’s acquisitions underscores the company’s aggressive expansion strategy. In recent years, Broadcom acquired key players in various sectors, including the security and database vendor CA Technologies for $18.9 billion in 2018 and Symantec’s business for $10.7 billion in 2019, subsequently selling it to Accenture. Additionally, Broadcom made several attempts to acquire rival Qualcomm, a move that was ultimately thwarted by former President Donald Trump over national security concerns.