Broadcom set to acquire VMware for $61 billion

Broadcom Inc. (NASDAQ: AVGO) has announced that it’s set to acquire enterprise software firm VMware, Inc. (NYSE: VMW) in a cash and stock deal amounting to $61 billion.

In its announcement on Thursday, Broadcom said it would be acquiring all of VMware’s outstanding shares as priced in the Broadcom stock’s closing value on 25 May 2022. The deal also includes net debt of $8 billion, according to the press release.

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Hock Tan, President and CEO of Broadcom, commented:

Building upon our proven track record of successful M&A, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company.

The Broadcom chief expects the deal to benefit both Broadcom and VMware shareholders in the long run.

We look forward to VMware’s talented team joining Broadcom, further cultivating a shared culture of innovation and driving even greater value for our combined stakeholders, including both sets of shareholders.”

Once the deal is sealed, the Broadcom Software Group will rebrand as VMware as part of its expansion, with plans to incorporate the semiconductor maker’s existing infrastructure into the VMware portfolio.

One of the largest tech acquisitions

The deal could add to Broadcom’s recent acquisitions of CA Technologies for $18.9 billion and Symantec for $10.7 billion. The two, completed in 2018 and 2019 respectively, pale in comparison to the just-announced VMware deal.

If completed, Broadcom’s acquisition would rank as the third-largest in the technology industry, dwarfed by two others in the $60 billion range. The $69 billion bid Microsoft struck for Activision Blizzard is set to be the largest. Meanwhile, the $67 billion Dell shelled out to acquire EMC in 2016 ranks as the second largest.

In 2018, Broadcom failed in its quest to acquire Qualcomm in what would have been a staggering $117 deal.

Broadcom stock jumps

In other Broadcom news, the company announced its Q2 earnings results on Thursday morning. Per the results, Q2 adjusted earnings were $9.07 per share against analyst estimates of $8.70 per share. Revenue also beat Wall Street estimates, coming in at $8.1 billion against the estimated $7.9 billion for a 23% year-over-year growth. Broadcom also expects a positive third quarter.

The company’s stock jumped following the earnings report and acquisition news. In late morning trading, the AVGO price stood at $548.48, nearly 3.2% up.