BY Richard Summerfield
Broadcom Inc, a global leader in semiconductor production, has agreed to acquire cloud computing company VMware Inc in a $61bn cash-and stock deal.
Under the terms of the deal, Broadcom will pay $142.50 in cash or 0.2520 of a Broadcom share for each VMware share – a price which represents a premium of nearly 49 percent to the stock’s last close before talks of the deal were first reported on 22 May. Broadcom will also assume $8bn of VMware’s net debt.
Broadcom has already got commitments from a consortium of banks for $32bn in debt funding for the deal. VMware will be allowed to solicit offers from rival bidders for 40 days as part of the agreement. Should VMware opt for an alternative bidder during this period it will be required to pay a termination fee of $750m.
The transaction, which is expected to complete in Broadcom’s fiscal year 2023, is subject to the receipt of regulatory approvals and other customary closing conditions, including approval by VMware shareholders.
“Building upon our proven track record of successful M&A, 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,” said Hock Tan, president and chief executive of Broadcom. “We look forward to VMware’s talented team joining Broadcom, further cultivating a shared culture of innovation and driving even greater value for our combined stakeholders, including both sets of shareholders.”
“VMware has been reshaping the IT landscape for the past 24 years, helping our customers become digital businesses,” said Raghu Raghuram, chief executive of VMware. “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.”
“VMware has long been recognized for its enterprise software leadership, and through this transaction we will provide customers worldwide with the next generation of infrastructure software,” said Tom Krause, president of the Broadcom Software Group. “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. We have deep respect for VMware’s customer focus and innovation track record, and look forward to bringing together our two organizations.”