Broadcom has said it will acquire cloud computing company VMware in a US$61 billion (AUD$86 billion) cash-and-stock deal, the chipmaker’s biggest and boldest bid to diversify its business into enterprise software.
- The deal is Broadcom’s second-biggest takeover following its failed Qualcomm attempt in 2018
- It will give Broadcom access to VMware’s cloud clients and data centres
- The deal is expected to be completed in Broadcom’s fiscal year 2023
The purchase announced on Thursday is the second-biggest globally so far in 2022, after Microsoft’s US$68 billion ($97 billion) buyout of video game maker Activision Blizzard.
VMware shareholders will get US$142.50 ($201.33) per share under the purchase, resulting in a premium of nearly 49 per cent to the stock’s close on May 22, when talks of the deal were first reported.
Broadcom will assume US$8 billion ($11 billion) of VMware net debt, the company said.
Broadcom shares were up 1.6 per cent in pre-market trading, while VMWare fell nearly 1 per cent.
Broadcom Chief Executive Officer Hock Tan said the company is seeing enterprise spending is “on fire”.
Buying VMware would give Broadcom access to the software firm’s cloud clients and their data centres, and could help it capitalise on this trend further.
Software became a substantial part of Broadcom’s business after it acquired CA Technologies for nearly $27 billion in 2018 and Symantec’s security division for $15 billion in 2019.
The bid to buy VMware is Broadcom’s second-biggest takeover attempt, after its failed attempt to buy smartphone chip behemoth Qualcomm for almost $150 billion in 2018.
The Broadcom Software Group will rebrand and operate as VMware once the transaction closes.
Michael Dell is VMware’s chairman and he owns 40.2 per cent of the company’s outstanding shares.
It’s anticipated that current Broadcom shareholders will own approximately 88 per cent and current VMware shareholders will own about 12 per cent of the combined company.
The boards of both companies have approved the deal, which is expected to be completed in Broadcom’s fiscal year 2023.