Broadcom Is Acquiring VMware In A $61B Mega Enterprise Software Deal

Broadcom webpage
Barring any regulatory hurdles, Broadcom is buying virtualization giant VMware for around $61 billion in a cash and stock transaction, the two companies announced today. The sale amount is based on the closing price of Broadcom's common stock on May 25, 2022, and as part of the deal the company will assume VMware's $8 billion net debt.

This ranks as the second largest acquisition announced this year, behind only Microsoft's pending deal to buy Activision Blizzard for $68.7 billion. When and if completed, the Broadcom Software Group will rebrand and operate as VMware.

"By bringing together the complementary Broadcom Software portfolio with the leading VMware platform, the combined company will provide enterprise customers an expanded platform of critical infrastructure solutions to accelerate innovation and address the most complex information technology infrastructure needs," Broadcom says.

Both boards of directors have unanimously approved the deal, with VMware shareholders set to receive either $142.50 or 0.2520 shares of Broadcom common stock for each VMware share they own. If all goes to plan, Broadcom expects the deal to close during its fiscal year 2023. However, it's not a foregone conclusion, and not solely because of the regulatory approval process.

"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," Broadcomm stated in a press release.

In other words, VMware can shop around for a better offer, which could potentially set the stage for a bidding war. Given that this is one of the largest tech deals ever, though, there are only so many potential suitors that could engage in such a thing.

This is obviously a huge move for Broadcom, which designs and sells a host of wired and wireless chipsets (and has already begun sampling Wi-Fi 7 chips), storage products, networking gear, and so forth. Buying VMware would significantly add to Broadcom's software stack with cloud computing and virtualization technologies and solutions that it could immediately incorporate into its portfolio.

"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.

Top Image Source: Jernej Furman via Flickr