[Asia Economy Reporter Jeong Hyunjin] U.S. semiconductor fabless company Broadcom is reportedly pursuing the acquisition of software firm VMware for $60 billion (approximately 76 trillion KRW) and is expected to announce the deal as early as this week, according to the Wall Street Journal (WSJ) on the 23rd (local time). If both parties finalize the acquisition, it would mark a major merger and acquisition (M&A) deal amid high market volatility caused by recession concerns and a plunge in tech stocks.
WSJ, citing multiple sources, reported that Broadcom and VMware are negotiating an acquisition price of $140 per share and plan to make a final announcement as soon as the 26th. This follows Bloomberg News’ report the previous day that acquisition talks were underway, now providing more specific details on the price discussions. WSJ noted that the acquisition price has not yet been finalized and that Broadcom plans to contact several banks to arrange a $40 billion loan to finance the deal.
WSJ explained, "The VMware acquisition talks demonstrate that large-scale deals are still possible amid significant market volatility, such as the recent announcement of Elon Musk, Tesla CEO’s acquisition of Twitter last month." While stock price crashes have lowered the market value of acquisition targets, private equity firms hold massive cash reserves, making large M&As feasible despite market turmoil.
Bloomberg assessed that the VMware acquisition would be one of the largest in the history of technology companies. According to Bloomberg, the total value of technology company acquisitions worldwide this year reached $263 billion, a 46% increase compared to the previous year.
Broadcom has been pursuing large-scale acquisitions of software companies. Hock Tan, Broadcom’s CEO, acquired CA Technologies for $18.9 billion in 2018 and Symantec’s security business for $10.7 billion in 2019, and has hinted at further acquisition possibilities. In March, he mentioned to analysts that Broadcom has the capability to make acquisitions of an 'appropriate scale.'
Following the acquisition news, VMware’s stock price surged 25% in just one day. Founded in 1998, VMware was acquired by EMC in 2004 and went public in 2007. It was acquired again in 2016 when EMC was taken over by Dell, and was spun off from Dell last year.
Meanwhile, Pat Gelsinger, Intel CEO who led VMware for eight years until recently, expressed mixed feelings upon hearing the acquisition news during an interview with Bloomberg TV. He said, "I hope this acquisition helps VMware become stronger and create an innovative growth story, but if not, it would be unfortunate."
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