Marriage of Giants: Broadcom acquires VMware for a record $ 61 billion

Marriage of Giants: Broadcom acquires VMware for a record $ 61 billion

The rumor spread for several weeks. Now it’s official, semiconductor giant Broadcom has unveiled a takeover bid for VMware, another new technology giant that specializes in cloud software and services and data centers that serve as the IT infrastructure for banks, hospitals or airlines. The deal, which values ​​VMware at $ 61 billion, would be one of the biggest acquisitions of the year in the technology world.

The merger of the two US groups is a testament to the new global tensions that are pushing multinationals to join forces and become leaders in growing markets.

Broadcom and VMware are ogre in terms of mergers and acquisitions, as well as acquisitions of other heavyweights, such as CA Technologies, Symantec for the first, and VMware, acquired by EMC and then Dell. So the strike comes from this time Broadcom CEO Hock Tan, known for his acquisition party since his Singaporean company Avago itself took control of Broadcom in 2015.

In 2017, Broadcom put $ 130 billion on the table to buy its rival Qualcomm, but the merger was blocked by President Donald Trump’s government. He estimated that the operation would undermine national security because Broadcom was headquartered in Singapore.

This time the wedding project received the first support from businessman Michael Dell, who controls 40.2% of the capital vmwareas well as the investment company Silver Lake, which owns 10%, which guarantees the success of the operation.

Purely financial operations?

However, some analysts consider it a purely capitalist operation. In an internal letter sent to VMware employees around the world Gallery CEO Ragu Raghuram makes no secret of this: “ Our Board of Directors has concluded that this is a more effective way to increase the value held by our shareholders, especially in the current uncertain economic climate.. According to the Director-General, an operation that could take6 to 12 months“before completion”in Broadcom fiscal year 2023“Values ​​VMware at $ 70 billion.

However, at the head of the group, which defines itself as a “multi-cloud” player, the CEO rejects concerns: ” Many of you see Broadcom as focused on maximizing financial metrics rather than maximizing innovation. This is not correct because Broadcom has a history that shows that it works in both respects..

Broadcom offers to shareholders vmware to obtain $ 142.50 per share or 0.2520 Broadcom shares per share vmware. According to Thursday’s press release, distribution will take place, which will lead to the buyer financing half of the operation in cash and the other half in securities.

Diversification of heavy trucks

With this acquisition, the semiconductor manufacturer wants to expand its activities this time. Integration VMware intends to become a global service provider for companies with the ability to offer them both their semiconductors and remote computing infrastructures. Hock Tan, quoted in a press release, intends to make the new merged entity a “leader in technology infrastructures”.

The semiconductor market is characterized by the fact that it is cyclical, and therefore with potential air pockets that need to be damped, all the more so in the context of international tensions. With VMware, it is moving into dematerialized computing (cloud) and virtualization, which could accelerate the rise of virtual stock exchanges in the Metavers worlds.

This diversification trend also works among competitors such as Samsung, which this week announced a $ 356 billion mega investment plan to invest in its electronic chip factories, but also to accelerate biotechnology.

In addition to diversifying into other strategic sectors, there is also a concentration that began several years ago on the image of Broadcom’s competitors such as AMD and Nvidia. Until this agreement is completed, it is also uncertain that the other two US heavyweights, Intel and Cisco, will not come to make a counter-offer to VMware.

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