Broadcom inches closer to acquiring VMware for US$61 billion

Networking hardware giant Broadcom is inching closer to finalize the VMware acquisition. As the first company to virtualize the x86 architecture, VMware is well known for cloud computing and virtualization software such as the ESXi server hypervisor and the Workstation Pro suite with the free Player version. Broadcom announced the acquisition in May 2022 for US$61 billion, but the procedures have not yet been finalized, since the deal still needs to receive approval from a few more authorities. Nevertheless, an important step towards a favorable outcome has just been completed, as Broadcom recently received the green light from the European Commission.

DigitTimes reports that the European Commission approved the acquisition with one major condition: Broadcom is to offer guaranteed access to the interoperability API plus all the tools to allow development of Fibre Channel Host-Bus Adapters so that VMWare’s software would work flawlessly on competing hardware solutions from Marvell. The FC HBA drivers will thus become open source and Broadcom will need to respect these commitments for 10 years.

Broadcom already received approval from authorities in Australia, Brazil, Canada, South Africa and Taiwan, yet is still waiting for a decision from the US FTC and the UK CMA. Broadcom and VMware have agreed to a US$61 billion deal in cash and stock, of which US$32 billion needed to be financed through a bank consortium. This procedure is estimated to double Broadcom’s absolute debt. Broadcom's deal is significantly bigger than the Nvidia - Arm one estimated at ~US$50 billion after the termination, but it is still dwarfed by Microsoft's Activision acquisition estimated at US$75 billion.

At present, Broadcom’s software side accounts for close to a fifth of its sales. With a successful VMware acquisition, the software side would increase to account for almost 50% of the company’s sales.

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