Broadcom confirms deal to purchase VMware for $61B in cash, stock
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Broadcom (NASDAQ:AVGO) agreed to acquired VMware (NYSE:VMW) for about $61 billion in cash and stock. Broadcom rose 1.5%, while VMW was largely unchanged.
Under the terms of the deal, VMW holders can elect to receive $142.50 in cash or 0.2520 share of Broadcom common stock for each VMware share, according to a statement. Upon close, current AVGO holders will own 88% and current VMW holders will own 12% of the combined company.
The news comes after Bloomberg first reported about a potential combination on Sunday night. The deal is the largest for Broadcom (AVGO) after it attempted to purchase chipmaker Qualcomm (QCOM) for more than $100 billion in 2017, though withdrew its bid in 2018 after the deal was blocked by the Trump administration on national security concerns.
"Building upon our proven track record of successful M&A, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company," Broadcom CEO Hock Tan said in the statement.
The deal is expected to be completed in Broadcom's (AVGO)'s fiscal year 2023. Broadcom expects to maintain its current dividend policy.
 A combination is expected to see antitrust pushback, especially from other industry players who see VMware as the "Switzerland" of the data center segment, The Information reported on Monday.
The transaction includes a 40-day "go-shop" provision where VMware (VMW) and its board can actively solicit alternative takeover proposals.
Michael Dell and Silver Lake, which own 40.2% and 10% of VMware shares outstanding, respectively, have signed support agreements to vote in favor of the deal. In connection with the transaction, Broadcom obtained commitments from a consortium of banks for $32 billion in new, fully committed debt financing.
Dell Technologies (DELL) completed
the spin-off of its 81% equity ownership in VMware (VMW) in November. VMware (VMW) distributed a special cash dividend of $11.5B to its VMware shareholders, including Dell, which received $9.3B.
Barclays Capital Inc., BofA Securities, Inc., Citigroup Global Markets Inc., Credit Suisse Securities LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC are serving as financial advisors to Broadcom. Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are serving as financial advisors to VMware.
Separately, Broacom topped consensus in FQ2, authorized a new $10B buyback program.