VMware potential deal price break raised to $115 from $100 at UBS
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VMware's (NYSE:VMW) stock could fall to $115 a share if its planned $61 billion sale to Broadcom (NASDAQ:AVGO) were to be scuttled due to regulatory issues, up from an earlier estimate of $100, according to UBS. 
The increased price in a potential deal break comes from potential cost cuts that VMware (VMW) would likely take as its competitors have done in the past six months, UBS analyst Karl Keirstead, who has a neutral rating on VMW, wrote in a note on Wednesday.
"Weâve arrived at a view that our FCF/EBITDA estimates for VMware are too low as they donât reflect much if any upside from the potential for VMware to undertake cost take-out actions in the event of a deal break," Keirstead, who raised his price target on VMW to $151 from $147, wrote in the note. 
The UBS note comes as the sale of VMware (VMW) to Broadcom has seen increased regulatory scrutiny in recent months, with Europe's antitrust regulator issuing a "statement of objections" over the proposed deal a week ago. Late last month the U.K.'s antitrust regulator said it would be moving its review of the deal into a Phase 2.
The $115 a share standalone value for VMware (VMW) assumes a ~12x CY24 free cash flow multiple for the tech company, according to Keirstead. 
"We and investors have started wondering whether the Street FCF estimates are too low as they donât reflect the (high) potential that Michael Dell and the VMware management team would likely undertake a material workforce reduction and other cost take-out actions (a la Salesforce and other large-cap Software peers) in the event that the deal broke," Keirstead added.
Also see SA contributor Bram de Haas's piece from February entitled "Why I'm Not That Concerned About The Broadcom VMware Deal Breaking."