EU raises competition concerns over Broadcom’s $61B VMware acquisition

EU raises competition concerns over Broadcom’s $61B VMware acquisition

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The European Commission, the European Union’s executive branch, has determined that Broadcom Inc.’s proposed acquisition of VMware Inc. may harm market competition.

The decision, which was released today, represents a preliminary view. A final decision is expected later this year. The development comes in connection with an antitrust investigation that the EU opened into the deal last December.

In May 2022, Broadcom inked a $61 billion cash-and-stock deal to buy VMware. The offer represents a 40% premium to the virtualization giant’s last unaffected stock price. In the years leading up to the deal, Broadcom spent nearly $29.6 billion on acquisitions to expand its software portfolio.

The EU launched its antitrust probe to determine if Broadcom might bundle VMware’s products with its other software assets. In particular, officials were concerned the company may stop offering VMware’s virtualization platform on a standalone basis. Another motivation for the probe was to determine the deal’s impact on the chip market.

Broadcom is one of the world’s top suppliers of data center chips. It makes NIC modules that are used to connect servers to the network of the data center in which they’re running. Broadcom also supplies FC HBA chips and storage adapters, which helps connect servers to storage hardware.

As part of its antitrust probe, the EU evaluated the proposed VMware acquisition’s impact on the NIC, FC HBA and storage adapter markets. It determined the deal could reduce competition in the latter two segments.

FCA HBA and storage adapter suppliers make their chips compatible with VMware’s virtualization software because it’s widely used in enterprise data centers. The EU is concerned that Broadcom could limit or delay rival chipmakers’ access to VMware software. Such a move, officials believe, would reduce innovation and raise prices for customers.

The EU has outlined its concerns in a statement of objections sent to Broadcom ahead of today’s announcement. The company can reply to the findings, as well as request a hearing. EU officials are set to make a final decision about the deal by June 21.

The transaction is also facing antitrust scrutiny from other regulators. Last year, the U.S Federal Trade Commission reportedly broadened its review of the proposed VMware acquisition. More recently, the U.K.’s antitrust regulator expressed concerns that the deal may harm competition in the chip market.

Broadcom had originally planned to close the acquisition in February. That month, the company pushed back the deadline to May 30. Broadcom told Reuters today that it still expects the deal to complete in its current fiscal year, which ends Oct. 30. 

Photo: Broadcom

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