Broadcom to acquire VMware for billions in cash and stock

Broadcom is set to acquire VMware for approximately USD$61Billion in cash and stock. Additionally, Broadcom will assume $8 billion of VMware net debt.

At the conclusion of the new deal, the Broadcom Software Group will rebrand and operate as VMware, utilising Broadcom's existing infrastructure and security software solutions as part of an expanded VMware portfolio. The transaction is expected to add approximately $8.5 billion of pro forma EBITDA from the acquisition within three years post-closing.

Broadcom says the new initiative will offer enterprise customers more choices and flexibility that will help address complex IT infrastructure challenges. They say that a shared focus on technology innovation and significant research and development expenditure will help create a seamless transition and allow a variety of new opportunities.

The solutions will continue to span across data centers and through cloud and edge computing, with a focus on building, running, managing, and protecting applications at scale across diversified, distributed environments.

"Building upon our proven track record of successful M-A, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company," says Broadcom president and CEO Hock Tan.

"We look forward to VMware's talented team joining Broadcom, further cultivating a shared culture of innovation and driving even greater value for our combined stakeholders, including both sets of shareholders."

VMware CEO Raghu Raghuram says that combining assets will provide customers with a legacy portfolio that will give businesses access to reliable and innovative solutions.

"VMware has been reshaping the IT landscape for the past 24 years, helping our customers become digital businesses. We stand for innovation and unwavering support of our customers and their most important business operations and now we are extending our commitment to exceptional service and innovation by becoming the new software platform for Broadcom," he says.

"Combining our assets and talented team with Broadcom's existing enterprise software portfolio, all housed under the VMware brand, creates a remarkable enterprise software player. Collectively, we will deliver even more choice, value and innovation to customers, enabling them to thrive in this increasingly complex multi-cloud era."

Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies,  a release by the company states that VMware shareholders will elect to receive either $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share.

Broadcom has also announced that they have obtained commitments from a consortium of banks for $32 billion in debt financing. In addition, they say they expect to maintain their current dividend policy of delivering 50% of its prior fiscal year's free cash flow to shareholders.

"Together with Broadcom, VMware will be even better positioned to deliver valuable, innovative solutions to even more of the world's largest enterprises," says VMware chairman of the board Michael Dell.