Broadcom gets $61 billion in VMware deal

Broadcom will get $61 billion for all outstanding shares of the cloud technology firm VMware in a cash and stock transaction.

Broadcom wants to establish a stronger foothold in the cloud computing market and VMware's technology allows large corporations to blend public cloud access with internal company networks.

The terms of the agreement, which has been unanimously approved by both companies' boards of directors, allows VMware shareholders to choose between $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share. Each shareholder's election will result in approximately 50% of VMware's shares being exchanged for cash consideration and 50% exchanged for Broadcom common stock.

After closing the transaction, the Broadcom Software group will rebrand and operate as VMware. In addition, Broadcom will assume $8 billion of net debt from VMware. The current Broadcom shareholders will own approximately 88% of the combined company on a full diluted basis, while the VMware shareholders will own approximately 12%.

Broadcom Software Group president Tom Krause said that VMware has been recognized for its enterprise software leadership, and will provide customers worldwide with the next generation of infrastructure software through this transaction. The combined company will be able to serve them more efficiently and securely, because of VMware's platform and Broadcom's infrastructure software solutions. We have deep respect for the VMware customer focus and innovation track record, and look forward to bringing together our two organizations. VMware chairman Michael Dell and Silver Lake signed support agreements to vote in favor of the transaction, as long as the VMware BoardVMware Board continues to recommend the proposed transaction with Broadcom. Dell owns 40.2% of the outstanding shares of VMware, while Silver Lake owns 10%.

VMware will be better positioned to deliver valuable, innovative solutions to even more of the world's largest enterprises, together with Broadcom, said in a statement. This is a landmark moment for VMware and gives our shareholders and employees the chance to participate in meaningful upside. In November, Dell Technologies completed its 81% equity ownership of VMware Inc.

The transaction is expected to be completed in Broadcom's fiscal year 2023, subject to VMware shareholder and regulatory approval and satisfaction of other customary closing conditions.

To finance the transaction, Broadcom has received commitments from a consortium of banks for $32 billion in new, fully committed debt financing.

The deal includes a go-shop provision, so VMware is allowed to actively solicit, receive, evaluate and possibly enter negotiations with parties that offer alternative proposals during a 40 day period.