Chipmaker Broadcom to acquire VMware in $61 billion deal

BENGALURU: Broadcom Inc said on Thursday it will acquire cloud computing company VMware Inc in a $61 billion cash-and-stock deal, the chipmaker’s biggest and boldest bid to diversify its business into enterprise software.

The acquisition is the second biggest announced globally so far this year, trailing only Microsoft Corp’s $68.7 billion deal to buy video game maker Activision Blizzard Inc.

Broadcom’s offer price of $142.50 per VMware share represents a premium of nearly 49% to the stock’s last close, when talks of the deal were first reported on May 22. Broadcom will also assume $8 billion of VMware’s net debt. The chipmaker’s shares were down nearly 1% in premarket trading on Thursday, while VMware rose 1.3%. Broadcom Chief Executive Hock Tan, who built his company into one of the world’s biggest chipmakers through acquisitions, is bringing his dealmaking playbook to the software sector.

In one fell swoop, the deal will almost triple Broadcom’s software-related revenue to about 45% of its total sales. Broadcom will instantly be validated as a major software player with the acquisition of VMware, Futurum Research analyst Daniel Newman said. “Having something like VMware ... will have a significant number of doors open that their current portfolio probably doesn’t open for them,” Newman added.

The agreement is also a coup for Dell Technologies Inc Chief Executive Michael Dell, who spun VMware out of the computer maker last year. Michael Dell owns a 40% stake in VMware, while his financial backer Silver Lake, a private equity firm, owns 10%. VMware will be allowed to solicit offers from rival bidders for 40 days as part of the agreement.

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