Reports: China, Retaliating for Biden Move, Could Delay Broadcom-VMware

The $61 billion Broadcom-VMware deal might not close on Oct. 30 after all.

On Thursday, The Financial Times, citing sources familiar with the matter, reported that the last regulatory approvals required may not come from China as soon as hoped. China’s State Administration of Market Regulation remains the final holdout as people on both sides of the Broadcom-VMware transaction seek to wrap it up.

But a delay appears possible, even as over the last couple weeks, media outlets have abounded with reports of imminent approvals from China.

A hiccup arose, though, on Oct. 17, when U.S. President Joe Biden implemented tougher controls to make it harder for China to acquire advanced computer chips and the equipment to make them. Outlets say China’s antitrust authorities could hit back by slowing the Broadcom-VMware consent process. Channel Futures did not immediately hear back from Broadcom regarding a request for comment on the reports. A VMware spokesperson told Channel Futures, “We continue to expect the deal to close on Oct. 30, 2023.”

VMware shares dropped on Thursday’s news, plummeting almost 9% at the time of publication. Broadcom stock, meanwhile, was on a roller coaster. It went down, up, then back down again by the time this article published.

Broadcom’s Tan Hock

Overall, the Broadcom-VMware deal has secured all the necessary regulatory approvals, except those needed from China. Broadcom CEO Hock Tan has continued to insist that the transaction will be completed within the company’s current fiscal year. In fact, Broadcom on Oct. 17 notified stockholders that they must decide by Oct. 23 how they want to be paid as a result of the Broadcom-VMware combination.

Broadcom further reiterated, in an Oct. 18 press release and a Securities and Exchange Commission filing, that it still expects to close VMware on Oct. 30, “subject to the receipt of regulatory approvals and other customary closing conditions.” That constitutes standard wording in any merger or acquisition, but could serve to hedge Broadcom’s bets.

Impact of a Broadcom-VMware Delay on Employees?

Over at TheLayoff.com, VMware employees chimed in on reports of a Broadcom-VMware delay — and the impact on them.

“This is a U.S.-China trade war that is beginning and BC/VMW is caught in the middle of it,” wrote one staffer.

“China was ok with the merger and were ready to approve it,” another wrote. “Just when Biden announced the ban on chips, they did a 180 and now there is a problem. This is 100% retaliation and that is a bad sign.”

For other employees, the anticipated delay is causing them to act in ways they weren’t planning.

“It is a real risk and the question is — is Hock prepared to go down that road? BC does over $10 billion in China annually so methinks no. This week is a game-changer. Sucks [because] I was anticipating a severance and starting a new job. Now I have to think that one through.”

Another said: “I’m not going to risk it. I’m unloading my [restricted stock units] before the VMW stock tanks like Intel.”

Broadcom is buying VMware in what amounted to 2022’s second-largest M&A deal, behind the newly approved Microsoft-Activision transaction. Broadcom, a chipmaker, aims to get into the cloud computing business with the purchase of VMware. How exactly Broadcom will treat VMware employees and channel partners, however, remains a bit of a mystery. Broadcom CEO Hock Tan has written blogs and given speeches highlighting his support for the channel but VMware staff may have less certainty in front of them. They’re supposed to find out any day whether they’ll get full-time job offers from Broadcom, or transitional roles or severance.