Broadcom to Acquire VMware for Approximately $69 Billion

Broadcom to target adding approximately $8.5 billion of pro forma EBITDA from the acquisition within three years post-closing

US chipmaker Broadcom has agreed to acquire cloud software company VMware for $69bn including debt, where Broadcom will acquire all of the outstanding shares of VMware in a cash-and-stock transaction that values VMware at approximately $61 billion, based on the closing price of Broadcom common stock on May 25, 2022. In addition, Broadcom will assume $8 billion of VMware net debt.

VMware shareholders will be able to choose to receive either $142.50 in cash or 0.2520 shares of Broadcom stock for each of their shares in the software group, a 33 per cent premium over the value of the company before talks emerged last week.

The takeover, which is being supported with $32bn in bank financing, will help transform Broadcom, an acquisitive semiconductor group, into a diversified tech company ranging from chips to cloud computing services.

Following the closing of the transaction, the Broadcom Software Group will rebrand and operate as VMware, incorporating Broadcom’s existing infrastructure and security software solutions as part of an expanded VMware portfolio.

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Hock Tan, President and Chief Executive Officer of Broadcom, said,

“Building upon our proven track record of successful M&A, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company.

We look forward to VMware’s talented team joining Broadcom, further cultivating a shared culture of innovation and driving even greater value for our combined stakeholders, including both sets of shareholders.”

Tom Krause, President of the Broadcom Software Group, added,

“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.

VMware’s platform and Broadcom’s infrastructure software solutions address different but important enterprise needs, and the combined company will be able to serve them more effectively and securely. We have deep respect for VMware’s customer focus and innovation track record, and look forward to bringing together our two organizations.”

The deal is subject to the usual regulatory approvals as well as shareholder agreement, and the transaction is expected to complete in Broadcom’s fiscal year 2023, which is due to start in November.