Broadcom has agreed to buy cloud-computing company VMware for about $61bn in one of the largest technology deals of all time, turning the chipmaker into a bigger force in software.
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This is according to a statement released last Thursday. It was said that VMware shareholders can choose to receive either $142.50 in cash or 0.2520 shares of Broadcom stock for each VMware share.
The offer represents about a 44 per cent premium to VMware’s closing price on May 20, 2022.
Broadcom’s purchase of VMware will help the company diversify away from its core business of designing and selling semiconductors into enterprise software, which can have larger margins. VMware’s products are used by enterprises to more efficiently run their own servers as well as cloud servers.
Broadcom is the most acquisitive semiconductor company and has strategically used mergers to fuel its growth in recent years. It previously purchased CA Technologies in 2018 for $18.9 billion and Symantec in 2019 for $10.7 billion.
But Broadcom had not made a large acquisition since 2019. In March, Broadcom CEO Hock Tan said the company had the “capacity to do a good-sized acquisition.”
Broadcom planned to purchase Qualcomm in 2018 for $117 billion before the deal was hampered by then-President Donald Trump, who cited national security concerns.
VMware spun off from Dell late last year in an effort to pay off debt. Dell originally acquired the company when it bought EMC in 2016. Michael Dell, founder and CEO of Dell, owns about 40% of VMware.
Michael Dell said, “Together with Broadcom, VMware will be even better positioned to deliver valuable, innovative solutions to even more of the world’s largest enterprises. This is a landmark moment for VMware and provides our shareholders and employees with the opportunity to participate in meaningful upside.”