News

Broadcom Acquiring VMware in Third Largest Tech Deal in History

• By Gladys Rama
• May 26, 2022

Confirming reports that surfaced this weekend, semiconductor company Broadcom announced on Thursday that it was acquiring virtualization pioneer VMware for $61 billion.

Both companies' boards of directors have unanimously approved the purchase, according to the announcement. Between regulatory and shareholder approvals, as well as other closing conditions, the deal is expected to be finalized in Broadcom's 2023 fiscal year, which runs from November 2022 through October 2023.

If successful, in terms of value, the Broadcom-VMware deal would fall behind only Dell's $67 billion acquisition of EMC in 2016 and Microsoft's $68.7 billion acquisition of Activision Blizzard earlier this year.

As part the deal's terms, Broadcom's software arm will become part of the VMware brand. The Broadcom Software Group encompasses business-critical software solutions for infrastructure and security,

"We stand for innovation and unwavering support of our customers and their most important business operations and now we are extending our commitment to exceptional service and innovation by becoming the new software platform for Broadcom," said VMware CEO Raghu Raghuram in a prepared statement. "Combining our assets and talented team with Broadcom's existing enterprise software portfolio, all housed under the VMware brand, creates a remarkable enterprise software player. Collectively, we will deliver even more choice, value and innovation to customers, enabling them to thrive in this increasingly complex multi-cloud era."

Broadcom, which already owns CA Technologies and security giant Symantec, has its foundations in semiconductors. With inflation and fears of recession potentially casting a pall on future IT hardware spending, the acquisition of VMware, with its broad portfolio of digital solutions, could act as a salve for Broadcom.

"VMware's platform and Broadcom's infrastructure software solutions address different but important enterprise needs, and the combined company will be able to serve them more effectively and securely," said Tom Krause, head of the Broadcom Software Group.

Among the deal's other terms, per the announcement:

• Broadcom will assume $8 billion of VMware net debt.
• VMware shareholders will elect to receive either $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share.
• Current Broadcom shareholders will own approximately 88% and current VMware shareholders will own approximately 12% of the combined company on a fully diluted basis.
• The merger agreement provides for a "go-shop" provision under which VMware and its Board of Directors may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals during a 40-day period following the execution date of the definitive agreement, expiring at 11:59 p.m. Pacific Time on July 5, 2022.

The announcement of the planned acquisition coincided with VMware's and Broadcom's respective quarterly earnings reports, both released Thursday. VMware reported total revenue of $3.09 billion for the quarter, a 3% year-over-year increase, as well as $899 million in sales from SaaS and subscription products, an increase of 21% year over year. Broadcom reported total revenue of $8.1 billion, up 23% year over year.