EU set to approve Broadcom’s $69 billion VMware acquisition

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EU regulators are set to approve Broadcom’s $69 billion acquisition of cloud software company VMware, delaying competition authorities in the UK and US from finalizing one of the biggest tech acquisitions ever.

The European Commission, the EU’s executive body, will say Wednesday that it has accepted Broadcom’s concessions that VMware’s software will continue to operate with rivals’ hardware, four people with knowledge of the matter said.

These people said the measure has proved sufficient to address the concerns of competition authorities in Brussels, without requiring Broadcom to sell parts of the VMware business.

While regulators in Brussels prepare to join counterparts in Canada, Brazil and South Africa in approving the deal, the acquisition faces competition scrutiny from the US, Britain and China.

UK regulators have launched an in-depth investigation, saying the merger creates a “realistic possibility” of weakening competition and “reduced innovation and increased costs of computer parts and software used by government, banks and telecommunications”. ” Might be possible. , The Competition and Markets Authority, which has played a stronger role in global tech takeovers in recent years, will report its findings by mid-September.

Broadcom agreed to buy VMware in May 2022 as part of an effort to turn the semiconductor conglomerate into a diversified technology company ranging from chips to cloud computing services.

But the deal has raised concerns among regulators that the buyout will hurt competition from rivals and drive up prices. Some VMware customers have expressed concern that they may be forced to buy only Broadcom’s services in the future.

Brussels issued formal charges in April that the deal could curb competition. As part of its defense, Silicon Valley-based Broadcom assured executives that it did not have an incentive to prevent its hardware competitors from working with VMware’s software, people familiar with its thinking said.

The European Commission and Broadcom declined to comment.

Previously, Broadcom has said it is working “constructively” with regulators and that the deal is about enabling innovation and expanding options in the marketplace.

Broadcom has been highly acquisitive since the company, originally known as Avago, went public in 2009. Its software deals include the $18.9 billion acquisition of CA Technologies and the $10.7 billion acquisition of Symantec’s enterprise security business. VMware will be its largest deal to date, consisting of $61 billion in cash and stock as well as $8 billion in debt.

Broadcom chief executive Hock Tan told the Financial Times this year that their M&A strategy was to “buy assets and run them better”, keeping their acquired businesses as independent product divisions.

He said that preserving VMware’s interoperability with a variety of hardware vendors, given regulators’ concerns about the deal, was essential to maintaining the appeal of its products to customers.

“The core value proposition for VMware to exist is that you need to be able to virtualize every piece of hardware that’s in the data center,” Tan said. “The moment you start downplaying, discriminating (or) disparaging pieces of hardware, you just shot yourself in the foot.”