Broadcom to buy VMware for $61bn in record tech deal

VMWare has a significant presence in Cork where it employs about 900 people.

Broadcom agreed to buy cloud-computing company VMware Inc. for about $61bn (€56.9bn) in one of the largest technology deals of all time, turning the chipmaker into a bigger force in software.

VMware shareholders can choose to receive either cash or shares of Broadcom stock for each VMware share, according to a statement yesterday. The offer represents about a 44% premium to VMware’s closing price on May 20, the last trading day before reports of the takeover talks.

VMWare has a significant presence in Cork where it employs about 900 people.

Founded in 1998 it invented so-called virtualisation software, which consolidated applications and workloads on a smaller number of server computers by using each server to handle more than one program.

VMware was acquired by storage technology giant EMC in 2004 which then passed to Dell Technologies in 2016. VMware then spun off from Dell last year. Michael Dell and private equity firm Silver Lake remain top investors in VMware.

Biggest takeover

This deal is the biggest takeover ever for a chipmaker and extends an acquisition spree for Broadcom Chief Executive Officer Hock Tan, who has built one of the largest and most diversified companies in the industry. VMware bolsters Broadcom’s software offerings — a key part of Tan’s strategy in recent years. He acquired corporate-software maker CA Technologies in 2018 and Symantec’s enterprise security business in 2019.

Broadcom’s offer — coming during a market downturn for tech stocks — has the support of key VMware shareholders Michael Dell and Silver Lake, and includes a so-called go-shop provision that allows VMware to solicit competing offers.

Broadcom, one of the most valuable companies in the chip industry, sells components for everything from the iPhone to industrial equipment. But it’s seeing some of its biggest growth from data centres — the massive server hubs that power cloud-computing services — and bulking up on software helps it further serve that market.

The purchase adds to a run of deals for the global tech industry this year. Microsoft agreed in January to buy video game publisher Activision Blizzard for $69bn (€64.3bn). A consortium backed by Vista Equity Partners is acquiring software maker Citrix Systems for $13bn (€12.12bn), and Elon Musk announced a $44bn (€41.03bn) buyout of Twitter in April. The largest previous deal involving a chip-maker was AMD’s $34.1bn (€31.8bn) takeover of Xilinx.

Chipmakers like Broadcom have enjoyed booming sales in recent years, fueled by the spread of semiconductors into more products - as well as by the need for work-from-home technology during the pandemic. 

Bloomberg