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• Broadcom offered to pay either $142.50 in cash or 0.2520 shares of its stock for each VMware share
• Deal will help chipmaker diversify away from its core business into enterprise software
Chipmaker Broadcom Inc (NASDAQ: AVGO) on Thursday said it would acquire cloud computing company VMware Inc (NYSE: VMW) for $61 billion to diversify its business into enterprise software.
Broadcom said VMware shareholders could choose to receive either $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share.
The cash-and-stock deal is more than an 18% premium to Wednesday’s closing price.
Moreover, the offer price is also nearly 49% premium to Vmware stock’s Friday closing price when the news was first reported.
Broadcom will also assume $8 billion of VMware’s net debt.
Once the transaction is complete, the chipmaker said it expects to earn around $8.5 billion within three years post-closing.
Moreover, the deal will almost triple Broadcom’s software-related sales to around half of its total revenue.
Michael Dell, the founder, chairman, and CEO of Dell Technologies Inc (NYSE: DELL), one of the world’s largest technology infrastructure companies, is VMware’s biggest individual stakeholder, owning about 40% after the cloud computing company was spun out of personal computer maker last year.
Dell, who is also the chair of Vmware’s board and private equity firm Silver Lake which owns a 10% stake in the cloud computing company, have signed support agreements to vote in favor of the transaction.
The acquisition is the second biggest deal announced globally so far this year, ranking only after Microsoft Corp’s (NASDAQ: MSFT) $68.7 billion offer to buy video game maker Activision Blizzard Inc (NASDAQ: ATVI).
Picture Credit: New YorK TImes
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