Chipmaker Broadcom is in talks to buy the cloud service provider VMware in a $61 billion cash-and-stock deal, according to the people familiar with the matter. If it is done, it would be the biggest and boldest bid that will diversify its business into enterprise software.
This will be the second-biggest acquisition globally so far this year, trailing only Microsoft’s Crop at a $ 68.7 billion deal to buy video game maker Activision Blizzard Inc.
The offer of $ 142.50 in cash or 0.2520 of a Broadcom share of each VMware stock represents a premium of nearly 49% to the stock’s last close before the talk of the deal was first reported on May 22. After this acquisition, Broadcom will assume $ 8 billion of VMware’s net debt.
Broadcom Chief Executive Hook Tan, who turned his company into one of the world’s biggest chipmakers through acquisitions, is now bringing his dealmaking playbook to the software sector.
The market capitalisation of VMware was $ 40.3 billion on Friday. As of now, Michael Dell is the biggest investor in VMware with a 40% stake as a result of Dell Technologies Inc. having spun out VMware to its shareholders last year.
Private equity firm Silver Lake, which also invested in Broadcom previously, is the second-largest shareholder with a 10% stake, according to the Refinitiv data.
This deal comes at a time when there is an increased push by the Biden administration for more competition in different sectors, from agriculture to technology.
On the whole matter, Broadcom and VMware have not responded yet.