Broadcom to acquire VMware for $61 billion
Proposed purchase of the cloud technology company by the computer chip and software firm will be one of biggest tech deals of the year
The front of the VMware headquarters in Palo Alto. Computer chip and software maker Broadcom on Thursday announced it will spend about $61 billion to acquire the cloud technology company VMware.
Computer chip and software maker Broadcom will spend about $61 billion to acquire the cloud technology company VMware, one of the biggest deals of the year despite an environment of rising inflation and economic uncertainty.
The proposed deal comes just weeks after billionaire and Tesla CEO Elon Musk offered to spend $44 billion on Twitter and it is second in size this year only to Microsoft’s nearly $70 billion acquisition of Activision Blizzard, the maker of Candy Crush and Call of Duty.
The massive buyouts are occurring at a time of heightened anxiety because of turmoil on the global supply chain, war in Europe and rising prices that have the potential to cool both business and consumer activity.
But that uncertainty has also created opportunities for companies like Broadcom. The techheavy Nasdaq has tumbled more than 26% this year. In one day this week, social media companies had about $130 billion in market value erased over rising questions about advertiser spending.
With the perceived value of tech companies on the decline, at least for now, more buyouts could be on the way with targeted companies appearing relatively cheap.
Broadcom CEO Hock Tan has been among the most aggressive buyers, building out the company with big acquisitions in recent years like Symantec for close to $11 billion in 2019, and CA Technologies for about $19 billion the previous year.
Broadcom, an Orange County company co-founded by Henry Nicholas III and Henry Samueli, was acquired by Avago Technologies Limited in 2016 for $37 billion.
The company, now based in San Jose, has been on a quest to grow its foothold in the cloud computing market. VMware’s technology allows large corporations to blend public cloud access with internal company networks. VMware has close relations with every major cloud company and provider, including Amazon, Google and Microsoft.
“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,” Tom Krause, president of the Broadcom Software Group, said in a statement Thursday.
The Broadcom Software Group will rebrand and operate as VMware once the transaction closes. The cash-and-stock deal also includes $8 billion of VMware net debt.
Under the proposal, VMware shareholders can choose to receive either $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share.