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CMA clears Broadcom’s $61bn purchase of VMware, scheduled for 30/10/23
Following regulator approvals in the UK on Monday the 21st of August 2023 and effective approval in the US, Broadcom confirmed that it plans to officially acquire VMware for $61bn on October 30th, 2023.
15 November, 2023

Following regulator approvals in the UK on Monday the 21st of August 2023 and effective approval in the US, Broadcom confirmed that it plans to officially acquire VMware for $61bn on October 30th, 2023. The California-based tech giant stated it received final transaction approval from the Competition and Markets Authority as well as legal merger clearance from the European Union, Australia, Brazil, Canada, Israel and South Africa with foreign investment control clearance in all necessary jurisdictions. 

San Jose and Palo Alto based, Broadcom Inc. (NASDAQ: AVGO) is a global technology leader that designs, develops, and supplies semiconductor and infrastructure software solutions. The organisation was founded in 1991 and was acquired by Avago Technologies in 2015. Broadcom’s products serve various markets, such as wireless communication, wired infrastructure, enterprise storage and broadband. The firm specialises in transceiver and processor integrated circuits for Ethernet and wireless LANs and routers which users will find in their homes. It is also known for its series of high-speed encryption co-processors, which delegate processor-intensive takes to a dedicated chip, increasing the speed and efficiency of the machine. As of 2022, roughly 78% of Broadcom’s revenue was coming from its semiconductor-based products and 22% from its infrastructure software products and services. 

Headquarters: San Jose, California, USA

No. of employees: 20,000

Market Cap: $352,320 million

EV (Enterprise Value): $398,428 million

LTM Revenue: $35,450 million

LTM EBITDA (Earnings before interest, taxes, depreciation, and amortization): $20,072 million

LTM EV/Revenue: 11.2x


VMware is a leading provider of multi-cloud services for all apps and virtualisation technology. VMware also created the software-defined data centre and played a vital role in virtualising network storage, before evolving into a hybrid cloud and digital workspace leader. This cloud computing and virtualization technology company was the first commercial and successful company to virtualise the x86 architecture, a type of instruction set architecture (ISA) for computer processors, familiar to many in the IT industry as it is the processor used in most computers and server hardware. The organisation’s most notable products are its hypervisors which are computer software designed to create and run virtual machines. VMware became well known for its first type-2 hypervisor known as GSX. This product has since evolved into two hypervisor product lines: VMware’s type-1 hypervisors running directly on hardware and their hosted type-2 hypervisors. 

Headquarters: Pato Alto, California, USA

No. of employees: 38,300

Market Cap: $61,160 million 

EV: $69,590 million

LTM Revenue: $13,610 million

LTM EBITDA: $3,214 million

LTM EV/Revenue: 5.1x


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 the expanded VMware portfolio. Hock Tan, Broadcom’s CEO believes that “This transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company.” As he states, by bringing together Broadcom’s software portfolio with VMware’s platform, enterprise customers will enjoy an expanded platform of crucial infrastructure solutions to accelerate innovation and attack the most complex information technology infrastructure needs. The enhanced solutions will provide customers and industry leaders with greater choice and flexibility to build, connect and protect applications across diversified, distributed environments regardless of whether they run from the data centre or to any cloud. 

Raghu Raghuram, VMware’s CEO shared that, “VMware has been reshaping the IT landscape for the past 24 years, helping our customers become digital businesses. We stand for innovation by becoming the new software platform for Broadcom. Combining our assets and talented team with Broadcom’s existing enterprise software portfolio… creates a remarkable enterprise software player.” 

Under the agreement terms, VMware shareholders will opt to receive either $142.50 in cash or 0.252 shares of Broadcom common stock for each VMware share. The shareholder election will be subject to proration, resulting in roughly 50% of VMware’s shares being exchanged for cash consideration and the same percentage being exchanged for Broadcom common stock. Based on the closing price of Broadcom common stock on May 25, 2022, the total $138.23 per share consideration represents a 44% premium to the closing price of VMware’s common stock. Upon closing of the transaction, based on outstanding shares of each company, current Broadcom shareholders will own approximately 88% and current VMware shareholders will own approximately 12% of the combined company.

The biggest threat to this transaction actually came to fruition when, last week, Beijing weighed delaying approval for this $61bn acquisition. China’s State Administration of Market Regulation had not signed off on the deal and is likely to delay approving the transaction in the wake of Washington’s tougher chip controls which were unveiled on 17th Oct 2023 to block Chinese access to high-performance semiconductors. South Korea’s Fair Trade Commission is another regulator yet to approve the deal – a FTC spokesperson said a review was held on 18th Oct with a decision to come next week. If the acquisition is marred by Beijing, it would mark the second time in five years that Broadcom has seen its deal-making ambitions curtailed by US-China tensions. 

Upon conducting my research for this article, I was sceptical of how Broadcom would achieve clearance from Southeast Asian states given US-China tensions. As of this week, my suspicions came to fruition as Beijing has gone ahead and delayed approval of this deal, “adding to the political nature of the process,” according to a spokesperson from Broadcom. This threat coupled with regulations from the CMA sheds light on the rigidity of anti-monopoly policies in our current economy which underscores the massive shift in market structure, compared to several decades ago when the proletariat would have total control over production processes and thus profits that any company would generate. However, according to Statista, Broadcom currently has a 4% market share as of 2022 with its competitor, Samsung Electronics, topping the chart at a 10% share. These statistics further underscore the presence of the CMA in policing the semiconductor market structure, ensuring no acquisitive deals render other competitors redundant due to monopoly power.

Edited by Daniel Williams and Christina Wei

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