Broadcom is on the cusp of finalizing its $61 billion acquisition of VMware, marking the third-largest deal in IT history, following in the footsteps of industry giants Dell/EMC and Microsoft/Activision Blizzard.
Broadcom’s venture into the acquisition began in May 2022, and as we approach fiscal 2023, the semiconductor juggernaut anticipates closing the monumental deal in the near future. This takeover will be financed through a 50/50 split of cash and Broadcom shares, signifying the company’s deep commitment to the acquisition’s success.
Under the agreed terms, VMware shareholders will receive $142.50 in cash or 0.2520 Broadcom shares for each VMware share held, representing a substantial 44% premium over VMware’s share price as of the initial reporting of the potential agreement on May 20. Moreover, it’s 32% higher than VMware’s weighted average share price over the past 30 days.
The combined value of the Broadcom and VMware deal comes close to industry records, with Dell’s acquisition of EMC ($67 billion) and Microsoft’s merger with Activision Blizzard ($68.7 billion) standing as current benchmarks. Some sources even quote the deal’s value at $69 billion, factoring in an additional $8 billion of net VMware debt that Broadcom will assume.
While the deal has seen remarkable progress, it’s also met some hurdles. Recently, concerns emerged about potential delays due to Chinese regulatory scrutiny, as U.S. sanctions on chip exports have tightened. To assuage these concerns, Broadcom issued a statement reaffirming its commitment to closing the agreement by the November 26 deadline. As of now, the company has secured approvals from regulators in the EU, the UK, and several other countries, with Chinese regulatory approval being the last significant hurdle.
The deal’s importance transcends its sheer scale. Firstly, it positions Broadcom’s takeover of VMware as the third-largest deal in IT history, a testament to the industry’s evolution. Secondly, this acquisition holds the potential to reshape Broadcom’s future and the broader tech landscape. By integrating VMware’s leadership in virtualization software, Broadcom seeks to accelerate its software business significantly while bolstering its presence in the networking and storage markets.
This acquisition follows a pattern of strategic purchases by Broadcom in recent years. Notably, in 2018, they acquired security and database vendor CA Technologies for $18.9 billion. In 2019, Broadcom made a $10.7 billion acquisition of Symantec’s business, later reselling it to Accenture. Additionally, Broadcom’s attempts to acquire rival Qualcomm were thwarted by national security concerns, with then-President Donald Trump blocking the deal.
As the IT industry watches with bated breath, the impending Broadcom-VMware deal carries profound implications for the tech landscape and the evolution of these two industry giants.