Broadcom-VMware $69bn merger to close after China approves deal


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US chipmaker Broadcom will complete its acquisition of cloud software company VMware on Wednesday, the two companies announced after China approved the $69bn deal.

Beijing approved the merger with some “restrictive conditions”, according to a statement from its anti-monopoly regulator on Tuesday, in a sign China was working to ease trade tensions with the US amid a broader slowdown in its domestic economic growth.

“Broadcom and VMware today announced that they have received all required regulatory approvals and intend to close Broadcom’s acquisition of VMware on November 22, 2023,” they said in a joint statement shortly after Beijing’s announcement. 

The Financial Times reported last month that Beijing was considering holding up the megamerger, first announced in May 2022, after the US tightened rules to block Chinese access to high-end chips.

Geopolitical friction between Washington and Beijing had hindered the speed at which the deal had been approved, according to people close to the situation in China.

This month’s meeting between presidents Xi Jinping and Joe Biden at the Apec summit in San Francisco has led to hopes of a thaw in relations between the two superpowers, which have resumed high-level military communications and agreed to establish a counter-narcotics working group.

China’s state administration for market regulation, the last global regulator to approve the merger, said it had held up the deal owing to concerns that it would “eliminate or restrict competition”.

Beijing said its approval depended on the merged entity not abusing its market position, including allowing interoperability between VMware’s servers and other third-party hardware providers.

The regulatory notice said that the merged company must take “protective measures” to protect the “sensitive information” of Broadcom’s competitors.

It also warned that third-party hardware manufacturers currently provide VMware with “sensitive information”, such as product plans, which Broadcom could use to its advantage once the companies were merged.

However, the conditional approval will help hedge funds including Pentwater, Millennium and DE Shaw, which each hold stakes worth more than $350mn in VMware, according to recent disclosures made for holdings at the end of September. The positions show how much Wall Street has bet on the deal closing successfully. 

The deal had been scheduled to close earlier this month but the deadline was extended until November 26. Regulators around the world have already cleared the deal, including in the EU, Canada, Brazil and South Africa.

In the UK, the Competition and Markets Authority explored concerns that the deal could harm the ability for Broadcom’s rivals to compete if their products worked less well with VMware’s software, or drive up the costs of computer servers. However, an in-depth investigation cleared the deal in August.

Additional reporting by Arash Massoudi in London

This post was originally published on Financial Times

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