Broadcom announced a deal to purchase VMware on Thursday for about $61 billion in cash and stock, while also assuming $8 billion of VMware’s debt.
The massive acquisition agreement is subject to better offers for up to 40 days, but positions Broadcom for greater software growth, especially in cloud software for enterprises. Broadcom had already been on a pathway to becoming more of an enterprise software company and perhaps less of a chipmaker. In the last four years, Broadcom purchased CA Technology for nearly $19 billion and Symantec’s security division for $10.7 billion.
The possibility of a deal arose only four days before the official announcement.
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In the few days after news of the possible deal surfaced, VMware shares rose 26%, and were up again slightly Thursday at the start of trading, reaching $120.75. Broadcom shares rose 1% just after the start of trading on Thursday, reaching $537.18.
Once the planned deal closes, expected in fiscal year 2023, Broadcom’s Software Group will be rebranded and operate as VMware, while incorporating the Broadcom infrastructure and security security software products as part of the expanded VMware portfolio, the companies said in a statement.
“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,” Broadcom CEO Hock Tan said in a statement.
He said he looked forward to VMware’s “talented team” joining Broadcom.
The combination under the VMware brand “creates a remarkable enterprise software player,” added VMware CEO Raghu Raghuram.
Michael Dell owns 40.2% of the VMware shares and is chair of the VMware board. The combined entity will allow VMware “to be even better positioned to deliver valuable, innovative solutions to even more of the world’s largest enterprises,” he said.
Under the terms of the merger agreement, VMware and its board may solicit and enter negotiations with parties that offer alternative proposals to the one offered by Broadcom, until midnight July 5.
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