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Broadcom closes its $61 billion megadeal with VMware

One of the biggest tech deals ever faced considerable regulatory scrutiny.


Steve Dent
·Reporter
Thu, November 23, 2023

SOPA Images via Getty Images

Broadcom's mega $61 billion VMware acquisition has closed following considerable scrutiny by regulators, the company announced in a press release. With China recently granting approval for the acquisition with added restrictions, the network chip manufacturer had secured all the required approvals.

"Broadcom has received legal merger clearance in Australia, Brazil, Canada, China, the European Union, Israel, Japan, South Africa, South Korea, Taiwan, the United Kingdom, and foreign investment control clearance in all necessary jurisdictions," the company said. "We are excited to welcome VMware to Broadcom and bring together our engineering-first, innovation-centric teams."

The Broadcom/VMware deal lacked the glamour of tech's other mega acquisition involving Microsoft and Activision. However, San Jose-based Broadcom's products form the structure of much of the internet, as they're widely used for data centers, cloud providers and network infrastructure. VMware, meanwhile, makes virtualization and cloud computing software that allows corporations to safely link local networks with public cloud access.

That made VMware a logical target for Broadcom, but it also placed the acquisition in the crosshairs of regulators in multiple regions. The European Commission, for one, was concerned that Broadcom could harm competition by limiting interoperability between rival hardware and VMware's server virtualization software. It also worried the company could either prevent or degrade access to VMware's software, or bundle VMware with its own hardware products.

Broadcom gained EU approval for the deal in the summer though, mainly by providing IP access and source code for key network fiber optic components to its main rival, Marvell. The EU also concluded that fears of VMware bundling were unfounded and that Broadcom would still face competition in the storage adapter and NIC markets.

There were also concerns that tensions between China and the US could scuttle the deal, after the Biden administration announced new rules in October making it harder to export high-end chips to China. However, approval in that market was announced yesterday, with conditions imposed by China on how Broadcom sells products locally. Namely, it had to ensure that VMware's server software was interoperable with rival hardware, China's regulator said in a statement.

Broadcom closes $69 billion VMware deal after China approval

Harshita Mary Varghese
Wed, November 22, 2023 

(Reuters) — Broadcom on Wednesday closed its $69 billion acquisition of cloud-computing firm VMware after receiving regulatory approval in last major market China and ending a months-long saga.

The deal, one of the biggest globally when announced in May 2022, was the latest in CEO Hock Tan's efforts to boost the chipmaker's software business.

However, the transaction faced tough regulatory scrutiny across the world and the companies had delayed the closing date three times.

China's regulatory approval came through on Tuesday after ongoing tensions with the U.S. around tougher chip export control measures had stoked fears among some investors on the company's ability to close the deal before the Nov. 26 deadline.

"The improved mood music after the meeting between China's President Xi Jinping and U.S. President Joe Biden earlier this month helped to settle remaining nerves," Danni Hewson, head of financial analysis at AJ Bell, said on Tuesday, after the companies said they planned to close the transaction on Nov. 22.

President Joe Biden greets China's President President Xi Jinping at the Filoli Estate in Woodside, Calif. on Nov, 15. (Doug Mills/ The New York Times via AP) 

The European Commission had approved the acquisition after Broadcom offered remedies to help rival Marvell Technology while the UK's Competition and Markets Authority (CMA) gave its green light following an in-depth investigation.

"Perhaps we will see some boards being willing to move forward now that we have seen the (Activision Blizzard) and (VMware) get blessing, but don't think we can count on it," said Cabot Henderson, market strategist at JonesTrading, on Tuesday.

Big Tech mergers such as Microsoft's now-closed $69 billion purchase of the "Call of Duty" publisher Activision have faced heightened regulatory pressure from the U.S. Federal Trade Commission under its Chair Lina Khan.

(Reporting by Harshita Mary Varghese; Editing by Sriraj Kalluvila)