Chipmaker Broadcom to buy VMware in $61 billion deal
On May 26, 2022, Broadcom Inc announced that it would invest $61 billion in cash and stock to Acquire VMware Inc, a cloud computing company. This is the chipmaker's most significant and costliest attempt to diversify into enterprise software.
On May 26, 2022, Broadcom Inc announced that it would invest $61 billion in cash and stock to acquire VMware Inc, a cloud computing company. This is the chipmaker's most significant and costliest attempt to diversify into enterprise software. The deal is the second largest globally this year, after only Microsoft Corp.'s $68.7 billion purchase of video game company Activision Blizzard Inc. According to a statement released on 26th May 2022, VMware stockholders can choose between receiving $142.50 in cash or 0.2520 shares of Broadcom stock for each VMware share.
The deal is the largest-ever takeover for a semiconductor company. It continues Broadcom Chief Executive Officer Hock Tan's acquisition spree, resulting in one of the industry's largest and most diversified organizations. Broadcom's software offerings are bolstered by VMware, which has been a key element of Tan's strategy in recent years. In 2018, he bought CA Technologies, a company that makes business software; then in 2019, he bought Symantec Corp.'s enterprise security division.
If VMware opts out of the deal, it would be charged a $1.5 billion breakup fee unless it can obtain a better offer by July 5. Then it will only cost $750 million. If Broadcom cancels the offer or the transaction fails to gain regulatory approval, Broadcom must pay VMware $1.5 billion.
Broadcom has received commitments for $32 billion in additional, fully committed debt financing from a consortium of banks to help fund the purchase, which is slated to close in Broadcom's fiscal year 2023. Broadcom would also assume VMware's net debt of $8 billion.
VMware is a Silicon Valley pioneer that was formed in the same year as Google, in 1998. It was the first company to develop virtualization software, which allowed applications and workloads to be combined onto a smaller number of server systems. It became easier for servers to handle multiple programs due to the innovation.
One of the chip industry's most valued companies, Broadcom supplies components for everything from the iPhone to industrial machinery. However, data centers, the vast server hubs that enable cloud-computing services is, where it is seeing the most growth, and stocking up on software will help it better serve that market.
