EU set to clear Broadcom’s $69bn acquisition of VMware

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EU regulators are set to clear Broadcom’s $69bn acquisition of cloud software company VMware, leaving competition authorities in the UK and US as holdouts to finalising one of the biggest tech takeovers.

The European Commission, the executive body of the EU, will say on Wednesday that it has accepted Broadcom’s concessions that VMware’s software will remain operable with rivals’ hardware, said four people with knowledge of the matter.

That measure has proven enough to address the concerns of competition authorities in Brussels, without the need for Broadcom to sell parts of the VMware business, these people said. 

While regulators in Brussels are set to join counterparts in Canada, Brazil and South Africa in clearing the deal, the acquisition continues to face competition probes from the US, UK and China.

The UK’s regulators have opened an in-depth investigation and said the merger gave rise to a “realistic prospect” of weakening competition and could lead to “less innovation and drive up the cost of computer parts and software” used by government, banks and telecoms. The Competition and Markets Authority, which has taken a stronger hand in global tech acquisitions in recent years, will report its findings by mid-September. 

Broadcom agreed to buy VMware in May 2022 as part of a push to turn the semiconductor group into a diversified tech company ranging from chips to cloud computing services.

But the deal has led to concerns from regulators that the purchase would hurt competition from rivals and lead to a rise in prices. Some of VMware’s clients have raised worries they could be tied into only buying Broadcom’s services in the future.

Brussels issued formal charges in April that the deal could curb competition. As part of its defence, Silicon Valley-based Broadcom persuaded officials that it does not have the incentive to prevent its hardware competitors from working with VMware’s software, people familiar with their thinking added. 

The European Commission and Broadcom declined to comment.

Previously, Broadcom has said it is working “constructively” with regulators and the deal is about enabling innovation and expanding choice in the market. 

Broadcom has been highly acquisitive since the company, originally known as Avago, went public in 2009. Its software deals include the $18.9bn acquisition of CA Technologies and $10.7bn buyout of Symantec’s enterprise security business. VMware would be its biggest deal yet, comprising $61bn in cash and stock as well as assuming $8bn in debt. 

Hock Tan, Broadcom’s chief executive, told the Financial Times this year that his M&A strategy is to “buy assets and run them better”, keeping its acquired businesses as independent product divisions. 

He said that preserving VMware’s interoperability with a wide variety of hardware vendors, a concern of regulators about the deal, was essential to maintaining its products’ appeal to customers. 

“The basic value proposition for VMware to exist is that you must be able to virtualise every piece of hardware that exists in a data centre,” Tan said. “The minute you start degrading, discriminating [or] deprecating pieces of hardware, you just shoot yourself in the foot.”