On November 22, 2023, Broadcom announced that it expects to officially complete the acquisition of VMware on Wednesday after receiving all necessary regulatory approvals. This transaction has been approved in several countries, including China.
Just last month, the deal was still awaiting approval from Chinese regulatory authorities. Previously, Broadcom's acquisition of VMware had been delayed due to antitrust reviews by UK and EU regulators. After Broadcom made a series of antitrust commitments to ensure that it would not negatively impact competing chip manufacturers, the regulators ultimately approved the transaction.
Broadcom initially announced its plan to acquire VMware for $61 billion in May 2022.
The chip manufacturer has raised $32 billion in debt financing from a banking consortium to fund this transaction.
Once the transaction is completed, it will become Broadcom's largest acquisition in history.
The acquisition terms stipulate that if the transaction ultimately fails to close, Broadcom must pay VMware a termination fee of up to $1.5 billion.
The two companies originally planned to complete the transaction by February 26 of this year, but later extended the deadline to November 26 (this Sunday). Broadcom announced this morning that the expected completion date for the transaction has been moved up by three days.
This acquisition will position the chip manufacturer as a key player in the infrastructure management software market.
VMware has consistently provided the industry's most popular hypervisors and a range of other tools, covering use cases such as network security and cloud cost optimization. The company's revenue for the last quarter grew by 6% year-over-year to $3.28 billion.
Acquiring VMware is also expected to enhance Broadcom's profitability. In May of this year, the chip manufacturer stated that it anticipates an increase of $8.5 billion in its earnings before interest, taxes, depreciation, and amortization (EBITDA) within three years after the transaction is completed. Broadcom plans to achieve this growth by significantly improving VMware's profitability.
After the transaction is completed, this chip manufacturer will integrate VMware into its software business. The software business mainly includes assets acquired by Broadcom through two other significant acquisitions in recent years.
The first acquisition was the company's purchase of CA Technologies Inc. for $18.9 billion in 2018. CA Technologies is one of the leading developers of mainframe software in the industry. One year after the deal was completed, Broadcom spent $10.7 billion to acquire the former enterprise security division of Symantec, which specializes in selling tools to protect corporate networks, cloud environments, and employee devices.
Broadcom expects that after the acquisition of VMware is completed, software will account for 49% of its sales. The company's remaining revenue comes from chips provided for servers, smartphones, Wi-Fi routers, and various other devices.