UK regulator launches inquiry into Broadcom’s proposed VMware acquisition

UK regulator launches inquiry into Broadcom’s proposed VMware acquisition

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The U.K.’s competition regulator, the Competition and Markets Authority, is investigating Broadcom Inc.’s proposed acquisition of VMware for $61.2 billion.

The CMA announced the development today.

Nasdaq-listed Broadcom is a major supplier of chips for data centers. The company’s silicon is used in data center networking devices such as switches, storage hardware and other systems. Broadcom also has an enterprise software division based in large part on assets that the company obtained through its 2018 purchase of CA Technologies Inc. for $18.9 billion.

In May, Broadcom announced plans to expand its software business significantly by acquiring VMware for $61.2 billion. The deal values the virtualization giant at $138.23 per share, a 44% premium to the last closing price of its stock before rumors of the acquisition first emerged. Broadcom secured $32 billion in debt financing commitments from a group of banks to help it carry out the acquisition. 

The inquiry that the CMA announced today into the proposed acquisition is at an early stage. To support the inquiry, the CMA has asked interested parties such as competitors to submit comments about the transaction. Comments may be submitted until Dec. 6. 

The feedback collection phase of CMA acquisition inquires is typically followed by a so-called Phase 1 investigation. During such investigations, the CMA seeks to determine whether there is a risk that an acquisition will substantially reduce competition in a given market. If the regulator determines that such an antitrust risk exists, it may launch a more in-depth Phase 2 investigation that can take several months to complete.

“We look forward to working with the Competition and Markets Authority throughout its process,” Broadcom said in a statement today. “We are confident that this deal does not present any competition issues.”

The CMA’s announcement of the inquiry comes a few months after it was reported that the U.S. Federal Trade Commission is also reviewing Broadcom’s proposed acquisition of VMware. The European Commission, the European Union’s executive branch, is also evaluating the acquisition. Reuters reported last month that the European Commission could make a decision on whether to approve the deal by Dec. 20.

“We are making progress with our various regulatory filings around the world and expect the transaction to be completed in Broadcom’s fiscal year 2023,” Broadcom stated today. “The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multicloud era.”

Following the acquisition’s completion, Broadcom plans to combine VMware with assets from its software division. The combined business will operate under the VMware brand. Broadcom expects to add about $8.5 billion in pro forma EBITDA, or earnings before interest, taxes, depreciation and amortization, to its balance sheet within three years of closing the acquisition. 

Photo: Broadcom

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