Broadcom To Acquire VMware In $61 Billion Deal

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The Broadcom Software Group will rebrand and operate as VMware, incorporating Broadcom’s existing infrastructure and security software solutions as part of an expanded VMware portfolio

US-based chipmaker Broadcom signed an agreement to buy cloud computing firm VMware in a $61-billion deal.

The cash and stock deal — one of the biggest tech mergers ever — will merge chipmaker Broadcom’s software assets into those of VMware, a leader in cloud computing and virtualization technology.

The combination is designed to boost Broadcom’s offerings to customers enabling “greater choice and flexibility to build, run, manage, connect and protect applications at scale across diversified, distributed environments,” said a joint press release from the companies announcing the deal.

Led by chief executive Hock Tan, Broadcom has grown by acquisition, reporting fiscal 2021 revenues of about $27.5 billion.

Following the closing of the transaction, the Broadcom Software Group will rebrand and operate as VMware, incorporating Broadcom’s existing infrastructure and security software solutions as part of an expanded VMware portfolio. Broadcom will also assume $8 billion of VMware debt.

In 2017, Broadcom made an unsolicited offer to acquire rival chipmaker Qualcomm for $117 billion, but the transaction was blocked by then-president Donald Trump’s administration on national security grounds. Qualcomm’s activities are mostly in the United States, but it is based in Singapore.

The deal with VMware would dilute Broadcom’s dependence on semiconductor revenues amid concerns of “chip cycle peaking,” said a note from UBS that also alluded to concerns about higher debt levels due to the deal.  

Under the transaction, VMware shareholders can elect to receive either $142.50 in cash or slightly more than one-fourth of a Broadcom share for each VMware share. That represents a premium of 49 percent compared with VMware’s stock price Friday before news reports of the deal surfaced.

Raghu Raghuram, Chief Executive Officer of VMware, said, “VMware has been reshaping the IT landscape for the past 24 years, helping our customers become digital businesses. 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. 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.”

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