Broadcom and VMWare Announce Imminent Completion of $61 Billion Merger
Broadcom Inc. has expressed confidence that its acquisition of software maker VMware Inc., valued at $61 billion, will be finalized before the November deadline. This reassurance comes as investors worry about potential delays caused by China’s review process.
Broadcom and VMware did not say how close they might be to approval from Chinese regulators, the last major hurdle to getting the deal done, but they said in a statement Monday that there was no “legal obstacle” to closing under U.S. merger rules. . The agreement between the companies expires on November 26.
If the merger is called off because the acquisition doesn’t get regulatory approval in time, Broadcom could be on the hook for a $1.5 billion termination fee under the terms of the deal.
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The companies noted in a statement on Monday that the deal has already received legal approval to combine in Australia, Brazil, Canada, the European Union, Israel, Japan, South Africa, South Korea, Taiwan and the United Kingdom, as well as foreign investments. supervisory clearance in all necessary jurisdictions. The Financial Times had previously reported that China’s competition authorities may take longer to approve the combination as US chip sanctions tightened and VMWare shares are being sent below the offer price.
VMware was in premarket trading at $147 on Monday, before the New York Stock Exchange opened after Friday’s close of $142.20. Under the terms of the deal, shareholders can choose between $142.50 in cash or 0.252 Broadcom shares for each VMware share. Broadcom’s stock closed at $838.36 on Friday.
That represented a 44 percent increase in VMware’s closing price on May 20, 2022, the last day of trading before Bloomberg News reported the takeover talks.
Broadcom CEO Hock Tan is looking to make VMware the centerpiece of its software operations after previously buying the enterprise security businesses of CA Technologies and Symantec Corp. Founded in 1998, VMware was a pioneer in the so-called virtualization programs that consolidate applications and workloads onto a smaller number of server computers. The innovation made it easier to handle servers with more than one program.
VMware agreed to the acquisition in May 2022, setting a record for a chipmaker acquisition. The largest previous acquisition was Advanced Micro Devices Inc.’s $34.1 billion purchase of Xilinx Inc. The deal included a so-called go-shop clause, according to which VMware could ask for competing offers, but no other suitors emerged.
The VMware transaction was part of the 2022 transaction. In January, Microsoft Corporation agreed to buy video game publisher Activision Blizzard Inc. for $69 billion. A consortium backed by Vista Equity Partners decided to buy software maker Citrix Systems Inc. for $13 billion, and Elon Musk announced in April that he would buy Twitter Inc. for $44 billion. All these contracts are now closed.
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