UPDATED 13:53 EST / NOVEMBER 21 2023

INFRA

Broadcom finally set to close VMware acquisition after receiving regulatory approval in China

Broadcom Inc. today announced that it expects to close its acquisition of VMware Inc. on Wednesday after receiving all the necessary regulatory approvals.

The transaction has received the green light in more than a half-dozen countries, including China, where it was reportedly awaiting approval as recently as last month. Broadcom’s acquisition of VMware was earlier delayed by antitrust scrutiny from regulators in the U.K. and the EU. The regulators eventually approved the deal after the company made a series of antitrust commitments to ensure there will be no negative impact on competing chipmakers.

Broadcom originally announced its plan to buy VMware for $61 billion last May. The chipmaker raised $32 billion in debt financing from a consortium of banks to finance the deal, which will be its largest-ever acquisition upon closing. The terms of the acquisition specify Broadcom must pay VMware a $1.5 billion termination fee in the event the deal doesn’t go through.

The companies originally planned to complete the transaction by Feb. 26. They later extended the deadline to Nov. 26, or this coming Sunday, three days after the expected deal completion date Broadcom announced this morning.

The acquisition will establish the chipmaker as a key player in the market for infrastructure management software. VMware provides the industry’s most popular hypervisor, as well as a range of other tools spanning use cases such as cybersecurity and cloud cost optimization. The company’s revenue rose 6% year-over-year, to $3.28 billion, last quarter.

The VMware acquisition is also poised to boost Broadcom’s profitability. Last May, the chipmaker stated that it expects to increase its earnings before interest, taxes, depreciation and amortization by $8.5 billion within three years of closing the deal. Broadcom plans to achieve that increase by significantly improving VMware’s profitability.

The chipmaker will fold VMware into its software business after the deal closes. The business mostly comprises assets that Broadcom obtained through two other, big-ticket acquisitions made over the past few years.

The first acquisition was the company’s purchase of CA Technologies Inc. in 2018 for $18.9 billion. CA Technologies was one of the industry’s top makers of mainframe software. A year after the deal, Broadcom spent $10.7 billion to buy Symantec Corp.’s former enterprise security unit, which sold tools for protecting corporate networks, cloud environments and employee devices.

Broadcom expects that software will account for 49% of its sales after the VMware deal goes through. The company makes the rest of its revenue by supplying chips for servers, smartphones, Wi-Fi routers and a variety of other devices. 

Photo: Broadcom

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