May 26, 2022
Broadcom’s software division will be merged with VMware, and all products will be marketed under the VMware brand name.
In an extraordinary transaction in the chip industry, Broadcom announced today (Thursday) the signing of an agreement to acquire the enterprise software company VMware, in a share and cash transaction with a total value of approximately $ 61 billion. Upon completion of the transaction, the Broadcom Software Group, which provides communications and security infrastructure software, will be integrated within VMware. All products will be marketed under the VMware brand name. According to 2021 data from the two companies, it appears that the new software division will be responsible for about 49% of the combined company’s sales.
The transaction was approved by the boards of directors of both companies. Upon completion, Broadcom’s existing shareholders will hold approximately 88% of the subsidiary and VMware shareholders are expected to hold approximately 12% of the shares. The deal needs to be approved by the shareholders’ meeting, but it is likely that they will approve it because the controlling shareholder of VMware, Michael Dell who owns 40.2% of the shares and the investment company Silver Lake Holding 10% of the shares, have signed a joint voting agreement supporting the realization of the deal.
In the absence of a regulatory hurdle, the deal is expected to be completed by November 2023. Broadcom has signed an agreement with a consortium of banks to obtain a $ 32 billion loan to finance the deal. At the same time, it is worth remembering that this agreement has an interesting exit point: it is defined as a “go-shop” type condition. That means it gives VMware the board a 40-day period during which it can review additional takeover bids. This test will be done in secret, and its results will be published only after the board of directors has made a final decision.
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