The deal will see Broadcom Software Group rebrand and operate as VMware, as the company seeks to expand in the software market.
Semiconductor giant Broadcom is buying cloud services provider VMware for $61bn in cash and stock in one of the biggest tech deals of the year.
The acquisition, announced today (26 May), is expected to close in Broadcom’s 2023 fiscal year subject to regulatory and shareholder approval.
The deal will see the Broadcom Software Group rebrand and operate as VMware, incorporating Broadcom’s infrastructure and security software as part of an expanded VMware portfolio.
Under the terms of the agreement, VMware shareholders will receive either $142.50 in cash or 0.252 shares of Broadcom common stock for each VMware share. Broadcom is also taking on $8bn in VMware debt.
The deal’s terms have been unanimously approved by the board of directors of both companies.
“VMware has been reshaping the IT landscape for the past 24 years, helping our customers become digital businesses,” VMware CEO Raghu Raghuram said.
“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,” he added. “Collectively, we will deliver even more choice, value and innovation to customers, enabling them to thrive in this increasingly complex multi-cloud era.”
The deal marks another big change for VMware, which spun out of Dell last year.
Broadcom said this aligns with the company’s strategy of scaling its software business and will offer new growth opportunities. The semiconductor giant took a big leap into the software sector when it acquired enterprise software vendor CA Technologies for almost $19bn in 2018.
“VMware has long been recognised for its enterprise software leadership, and through this transaction we will provide customers worldwide with the next generation of infrastructure software,” Broadcom president Tom Krause said.
“VMware’s platform and Broadcom’s infrastructure software solutions address different but important enterprise needs, and the combined company will be able to serve them more effectively and securely,” Krause added.
The acquisition is the second biggest globally so far this year, just behind Microsoft’s decision to snap up video game giant Activision Blizzard for $68.7bn.
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