After the closing of the deal, Broadcom Software Group, the US chipmaker’s enterprise software portfolio, and VMware will be combined to offer an expanded platform of critical infrastructure solutions to enterprise customers
Broadcom has agreed to acquire cloud computing and virtualisation technology firm VMware in a cash-and-stock deal worth around $61bn.
Additionally, the American semiconductor manufacturer will assume $8bn of VMware’s net debt.
Based in California, VMware provides multi-cloud services for all apps. Its multi-cloud portfolio spans application modernisation, cloud infrastructure, cloud management, networking, security, and anywhere workspaces.
Last year, Dell Technologies spun out its 81% stake in VMware to enable the latter to become a standalone company.
Broadcom said that after the deal is closed, the Broadcom Software Group, its enterprise software portfolio, will be rebranded as VMware. The enlarged software entity will incorporate the existing infrastructure and security software solutions of Broadcom.
By combining Broadcom Software portfolio with the VMware platform, the enlarged company is expected to offer an expanded platform of critical infrastructure solutions to enterprise customers. This will enable them to speed up innovation and address the most complex requirements in information technology infrastructure.
Broadcom president and CEO Hock Tan said: “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.
“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.”
As per the terms of the deal, shareholders of the publicly-listed VMware will choose to receive $142.5 in cash or 0.252 shares of Broadcom shares for each VMware share.
After the closing of the deal, current Broadcom shareholders will own a stake of around 88% in the combined company, while current VMware shareholders will hold the remaining stake of around 12%.
VMware CEO Raghu Raghuram said: “VMware has been reshaping the IT landscape for the past 24 years, helping our customers become digital businesses. We stand for innovation and unwavering support of our customers and their most important business operations and now we are extending our commitment to exceptional service and innovation by becoming the new software platform for Broadcom.
“Combining our assets and talented team with Broadcom’s existing enterprise software portfolio, all housed under the VMware brand, creates a remarkable enterprise software player. Collectively, we will deliver even more choice, value and innovation to customers, enabling them to thrive in this increasingly complex multi-cloud era.”
The deal, which is subject to regulatory approvals and other conditions such as approval from VMware’s shareholders, is expected to close in Broadcom’s fiscal year 2023.
It has been approved unanimously by the boards of directors of both firms. Michael Dell and Silver Lake, which hold stakes of 40.2% and 10%, respectively in VMware have agreed to vote in favour of the transaction.