The chip manufacturer is digging deep into its pockets for the software provider: Broadcom is buying VMWare for around $61 billion. The deal is expected to be completed in Broadcom’s next fiscal year and marks the second-highest acquisition of the current year so far, after Microsoft’s purchase of Activision-Blizzard.
Broadcom buys VMware: deal nears completion
Things have been rather mixed for software maker VMware after its spinoff from Dell last year. The company accumulated about eight billion U.S. dollars in debt, which would also be transferred to Broadcom.
The deal is also to be consummated in stock form. As Broadcom reports, shareholders will receive $142.50 per share in cash or 0.2520 Broadcom shares. Ultimately, half of the takeover is to be completed through shares and the other half through cash payment, which puts the projected equivalent value at around $61 billion.
Broadcom’s current offer is thus around 44 percent higher than the closing price of VMware shares on May 20, which subsequently soared even higher in view of the takeover. Dell founder Michael Dell and the investment company Silver Lake currently still hold 40.2 and 10 percent of the shares in VMware and thus the majority. Both are reportedly behind the Broadcom acquisition.
When the deal is completed in 2023, around 12 percent of the merged company will be in the hands of VMware shareholders, with Broadcom shareholders holding the remaining 88 percent.
For Broadcom, which primarily manufactures chips for Ethernet controllers, microcontrollers or modems, this is not the first purchase of a software company. Already about three years ago, the company bought the business division of manufacturer Symantec. VMware is considered a leading provider of virtualization software in cloud computing and server infrastructure.
“Together with Broadcom, VMware’s market position will continue to improve in order to provide the world’s largest companies with valuable and innovative solutions,” Michael Dell is certain.