Broadcom's US$69 billion acquisition of VMware gets the green light from China

Broadcom, a major player in the US chipmaking scene, made headlines in May 2022 when it revealed plans to acquire VMware.

Broadcom's US$69 billion acquisition of VMware gets the green light from China
Broadcom Limited company logo is pictured on an office building in Rancho Bernardo, California May 12, 2016. REUTERS/Mike Blake/File Photo

The backstory: Broadcom, a major player in the US chipmaking scene, made headlines in May 2022 when it revealed plans to acquire VMware, a heavyweight in cloud computing. The price tag attached to this move was US$61 billion. 

Now, this move is a game-changer for Broadcom, marking its grand entrance into the enterprise software world. Plus, it's the company's largest acquisition ever. To put it in perspective, it's the second-largest deal on the global stage for the year, just behind Microsoft's US$68.7 billion grab of Activision Blizzard.

Jump to December 2022, and European antitrust regulators hit the scene. They launched a full-scale investigation into Broadcom's plan. They were concerned about how it could shake up the market competition, especially in the hardware components department. While countries like Brazil, South Africa and Canada gave a nod to the acquisition, the UK took a closer look and initiated an extensive investigation in March of this year. The UK eventually gave the thumbs up in August. 

More recently: In April, the European Commission, in charge of antitrust matters, raised eyebrows and hinted at blocking Broadcom's acquisition. Their concern was that the merger might lead to hiked prices, lower quality and reduced innovation for business customers due to restricted market competition. Then, in July, the EU gave the green light to Broadcom's deal. This came after the company made some promises, offering competitors like Marvell access to tools and support for developing third-party storage adapters. 

The development: Now, Broadcom has successfully sealed the deal, acquiring VMware for a cool US$69 billion. The final stamp of approval came from Chinese regulators this Tuesday, wrapping up a rollercoaster ride that faced three delays in the closing date. Broadcom is shelling out a sum of US$61 billion in cash and stock for VMware and, on top of that, it's shouldering an additional US$8 billion of the company's debt. 

Key comments: 

"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," said Tom Krause, president of the Broadcom Software Group, in a statement back in May 2022. 

"The improved mood music after the meeting between China's President Xi Jinping and US President Joe Biden earlier this month helped to settle remaining nerves," said Danni Hewson, head of financial analysis at AJ Bell. 

"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.