Broadcom and VMware have announced an agreement under which Broadcom will acquire all outstanding shares of VMware in a cash-and-stock transaction valued at approximately $ 61 billion, based on the closing price of Broadcom common stock on May 25, 2022. In addition, Broadcom will take over $ 8 billion in VMware net debt.
VMware, a multi-cloud service provider for all apps, is a pioneer in virtualization technology, an innovation that has positively transformed x86 server-based computing. VMware then builds software-defined data centers and, before becoming a hybrid cloud and digital workspace leader, played a leading role in virtualizing networking and storage.
Today, VMware’s multi-cloud portfolio, application modernization, cloud management, cloud infrastructure, networking, security and the workplace everywhere, builds a flexible, consistent digital foundation on which the largest and most dynamic enterprises build, manage, Protect their most important and complex workload for the benefit of customers.
After the transaction closes, Broadcom Software Group will re-brand and manage VMware as part of an expanded VMware portfolio, incorporating Broadcom’s existing infrastructure and security software solutions.
By integrating the Broadcom software portfolio with the leading VMware platform, the consolidated company will provide an enhanced infrastructure solution solution to accelerate enterprise customer innovation and meet the needs of the most complex information technology infrastructure. Combined solutions will enable clients, including vertical leaders across all industries, to create, operate, manage, connect and secure multiple choice, scale applications across scalable environments wherever they run: from the data center, anywhere Cloud and Edge-Computing.
With the company’s shared focus on technology innovation and significant research and development costs, Broadcom will provide attractive benefits for customers and partners.
“Based on our proven track record of successful M&A, this transaction brings together our leading semiconductor and infrastructure software businesses to become an iconic pioneer and inventor of enterprise software,” said Hawk Tan, President and CEO of Broadcom. Imagine that To customers as a leading infrastructure technology company. We look forward to joining VMware’s talented team, Broadcom, to further develop a shared culture of innovation and to add more value to our collective stakeholders, including both sets of shareholders. “
Raghu Raghuram, Chief Executive Officer of VMware, said, “VMware has been redesigning the IT landscape for the last 24 years, helping our customers to become digital businesses. We stand to support and innovate our customers and their most important business activities, and we are now expanding our commitment to exceptional service and innovation by becoming Broadcom’s new software platform. Combining our resourceful and talented team with Broadcom’s existing enterprise software portfolio, which is under all VMware brands, creates a remarkable enterprise software player. Together, we will provide customers with more choice, value and innovation by enabling them to thrive in this increasingly complex multi-cloud era. “
Tom Kraus, president of Broadcom Software Group, said: “VMware has long been recognized for its enterprise software leadership, and through this transaction we will be delivering the next generation of infrastructure software to customers worldwide. VMware’s platform and Broadcom’s infrastructure software solutions address the needs of diverse but important enterprises, and the combined company will be able to serve them more efficiently and securely. We deeply respect VMware’s customer focus and track record of innovation, and look forward to merging our two companies. “
Michael Dale, Chairman of the VMware Board, said: “With Broadcom, VMware will be in a better position to provide valuable, innovative solutions to the world’s largest organizations. “
EBITDA is expected to add about $ 8.5 billion to Proforma from the acquisition within three years after the transaction closes. Pro Forma, software revenue for each company’s FY 2021 is expected to be about 49% of total Broadcom revenue.
Transaction details and way to complete
Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, VMware shareholders will choose to receive V 142.50 in cash or 0.2520 shares of Broadcom Common stock for each VMware share. Shareholder selection will be subject to pressure, with approximately 50% of VMware’s shares being exchanged for cash and 50% for Broadcom common stock.
Based on the closing price of Broadcom common stock on May 25, 2022, representing a premium of 44% of the closing price of VMware common stock totaling $ 138.23 per share, on May 20, 2022, the last trading day before the media speculation was a potential transaction. , And a 32% premium VMware unaffected 30-day volume weighted average price (VWAP).
Following the closing of the transaction, based on the outstanding shares of each company from this date, existing Broadcom shareholders will own about 88% and current VMware shareholders will own about 12% of the combined company on a fully mixed basis.
Michael Dale and Silver Lake, who own the outstanding 40.2% and 10% of VMware shares, respectively, signed a support agreement to vote on the transaction, until the VMware board continues to recommend the proposed transaction with Broadcom.
Related to the transaction, Broadcom has received a pledge from a consortium of banks for, 32 billion to finance a new, fully committed loan.
Broadcom expects to maintain its current dividend policy of distributing 50% of its previous fiscal year free cash flow to shareholders. Broadcom expects to maintain an investment grade rating, due to its strong cash flow output and rapid de-leverage intent.
The transaction, which is expected to be completed by Broadcom’s fiscal year 2023, is subject to regulatory approval, including approval of VMware shareholders, and other traditional closing terms.
The consolidation agreement provides for a “go-shop” provision under which VMware and its board of directors may actively request, accept, evaluate, and potentially enter into negotiations with parties who make alternative proposals within a 40-day period after the specified execution date. Offers. The agreement will expire on July 5, 2022 at 11:59 PM Pacific Time.
There can be no guarantee that this process will turn into a higher resolution. VMware does not wish to publish developments on this process until its board of directors decides on a possible higher resolution.
