The takeover will take the form of a share exchange and cash payment. VMware stockholders can choose to cash out $ 142.5 for each of their shares or to receive 0.252 Broadcom shares. The offer price represents a premium of more than 48 percent against the closing share price of May 22, before the agreement began to be discussed. Broadcom will also take over VMware’s $ 8 billion debt.
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The agreement comes about six months after the American company Dell Technologies set aside its 81% stake in VMware. Dell founder Michael Dell, along with investment firm Silver Lake, who helped him turn Dell into a private company in 2013, owns more than 50 percent of VMware.
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The boards of both companies have already approved the agreement. It is expected to be completed in the next fiscal year and Broadcom’s current shareholders will own approximately 88 percent of the shares in the merged company. VMware’s current shareholders will account for the remaining 12 percent. The Broadcom Software Group is to be renamed VMware upon completion of the transaction.
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Broadcom is a semiconductor giant that grew mainly due to acquisitions. The company is looking for agreements that would help it grow in the enterprise software market. Last year was close to taking over the SAS Institute software company, but in the end the founders changed their minds. Its first major entry into the software market was the 2018 acquisition of CA Technologies for about $ 19 billion.
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Competition for Amazon and Microsoft
VMware has a strong position in the so-called hybrid cloud market, where large companies combine public cloud services, such as those from Amazon and Microsoft, with their own private networks.
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This year’s largest acquisition was announced in January. Microsoft then announced that it would take over video game maker Acitivision Blizzard for $ 68.7 billion.
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Demand for cloud computing, which allows customers to lease computing power instead of investing in their own, has risen sharply in recent years. The first users of these services were start-ups and other companies that did not have the support of their own IT department. Companies across all industries now rely on it.
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