Broadcom isn’t done attempting major acquisitions. The chip giant is buying cloud- and virtualization-focused software developer VMware for the equivalent of $61 billion in cash and stock. The move would fold Broadcom’s software division into VMware and create a theoretical powerhouse that helps companies run apps in all sorts of environments, including “any” cloud service.
The proposed union would have Broadcom take on $8 billion of VMware’s debt. The deal should close sometime in Broadcom’s fiscal 2023 (no later than early calendar 2023) if regulators approve the deal. Notably, though, VMware isn’t yet locked into the merger — a “go-shop” clause will let it consider and even solicit deals from other companies through July 5th.
If the purchase goes forward, it will represent one of the larger tech acquisitions so far. Appropriately, Dell (whose founder sits on VMware’s board) set a record for several years when it bought VMware’s then-owner EMC for $67 billion in 2015. Microsoft eclipsed that, though, with its still-pending $68.7 billion buyout of Activision Blizzard.
A play like this isn’t completely unexpected. On top of its debt, VMware has seen declining profits and modest revenue gains. This could help the firm overcome those hurdles and help its competitiveness. Broadcom may not want to count on the purchase going through, however. Former President Trump blocked Broadcom’s purchase of Qualcomm in 2018 over national security concerns. While the administration and acquisition target are clearly different this time around, it wouldn’t be surprising if Broadcom faces similar levels of regulatory scrutiny.