Broadcom-VMware Deal Takes Major Step Toward Closing Date

The Broadcom-VMware deal has cleared another regulatory hurdle, making a full closing by the end of the third quarter more inevitable.

On Monday, the UK’s Competition and Markets Authority gave its final blessing to the long-pending, $61 billion transaction.

Broadcom hailed the move as a major development, stating that it expects to close the VMware purchase on Oct. 30.

CMA Wraps Investigation Into Broadcom-VMware Deal

Last month, the CMA granted provisional clearance to the deal. Authorities, like their peers at the European Commission, had been investigating concerns that pairing a behemoth chipmaker with a virtualization software provider would weaken competition in the server market.

But both the European Commission – and, now, the CMA – have determined those fears as overblown and say the Broadcom-VMware deal will not harm the companies’ rivals.

For its part, the CMA also evaluated the impact of the merger agreement on innovation.

“The panel looked at whether Broadcom’s rivals need to share commercially sensitive information with VMware to ensure their hardware and VMware’s software work together in computer servers, and whether there could be concerns about Broadcom potentially having access to such information following the deal,” the CMA wrote in its Aug. 21 findings clearing the Broadcom-VMware deal. “However, the panel found that this is unlikely to be a concern, in particular since information about new product adaptations only needs to be shared with VMware at a stage when it is too late to be of commercial benefit to Broadcom.”

As a result, the CMA has ended its investigation – which included reviewing more than 250,000 internal business documents – into the acquisition.

“[H]aving carefully considered the evidence and found no competition concerns, we have concluded the deal can go ahead,” Richard Feasey, chair of the independent panel that led the second phase of inquiry into the Broadcom-VMware deal, said in a prepared statement.

Earlier this year, the CMA became a source of concern for progress on the Broadcom-VMware deal. Following the European Commission’s lead in late 2022, the UK regulatory body implemented a two-stage assessment into Broadcom’s takeover of VMware. One analyst, GlobalData’s Rajesh Muru, said in April that the proceedings “could create a real hurdle for Broadcom.” At the time, he pegged the chances of a Broadcom-VMware deal closing at 50/50.

Broadcom-VMware Deal Faces ‘No Legal Impediment to Closing’ in United States

Yet, with the CMA’s approval in hand, those chances appear more like 99% in Broadcom’s favor. The United States has remained the last main holdout. However, that no longer looks like an obstacle for the Broadcom-VMware deal.

That’s because U.S. regulatory requirements surrounding large company tie-ups have expired and Broadcom is free to proceed.

SeekingAlpha reported last week that the Federal Trade Commission, which determines the fate of many mergers and acquisitions, held its second closed-door meeting in several months on the Broadcom-VMware deal. Last year, the FTC had issued a “second request” to gain more insight into the proposed acquisition of VMware, then fell silent on the matter — publicly, at least. And with the Hart-Scott-Rodino pre-merger waiting period now lapsed with no apparent further inquiry from the FTC, “there is no legal impediment to closing under U.S. merger regulations,” Broadcom said in an Aug. 21 press release.

What Comes Next for the Broadcom-VMware Deal?

The CMA approval for the acquisition follows other important global regulatory clearances and sets up the companies to combine.

In addition to the European Union, Australia, Brazil, Canada, Israel, South Africa and Taiwan and other “necessary jurisdictions,” as Broadcom called them, have all said yes to the pairing.

That leaves the United States where, again, Broadcom said it expects to close the VMware purchase on Oct. 30.

What happens after that remains anyone’s guess. Rumor has it Broadcom plans to lay off potentially thousands of VMware employees, even before the Broadcom-VMware deal closes. According to heavily redacted documents Broadcom filed with the CMA in May, the company seems to have little faith in VMware and its cloud strategy. If that’s the case, it could be looking to wipe the slate clean and jumpstart its take on cloud with its own experts.

“VMware has failed,” Broadcom wrote. (Go here to read the rest of that article.)

For the moment, investors are buoyed by the CMA’s thumbs-up on the Broadcom-VMware deal. The company’s stock had risen nearly 3% by a little after noon Eastern on Monday. VMware share prices, meanwhile, jumped almost 4.5% on the news.