Expected acquisition of a cloud computing provider
Will probably rank as one of the biggest consolidations of the year.
Broadcom (ticker: AVGO), a chip maker, is in talks to buy VMware (VMW), according to Bloomberg, which says the transaction could be worth more than $ 50 billion. The deal is expected to be announced by Thursday, media reports said. Broadcom and VMware did not respond to a request for comment.
VMware stock rose nearly 25% to close at 9 119.43 on Monday on news of a potential sell-off. Broadcom, meanwhile, fell 3% to $ 526.36. VMware currently has a market capitalization of 50.2 billion, with much larger Broadcom valued at $ 215 billion.
Here are five key pointers in moving forward with the deal.
First, VMware was an earlier acquisition target. EMC acquired the company for 25 625 million in 2004, taking it publicly for $ 29 million in 2007 but leaving most of VMware after the initial public offering. In 2016,
(DELL) bought EMC for 67 billion. Dell discontinued VMware in November 2021, paying a special cash dividend of $ 11.5 billion to all VMware shareholders, including Dell stockholders who received approximately $ 9.3 billion.
Second, Michael Dell, the founder of Dell Technologies, is expected to be a big winner once the deal is done. He currently owns 40% of VMware, while Silver Lake, a private-equity firm, owns about 10%, according to the data provider.
Three, the transaction may be at least partly the result of recent market volatility, which has hit technology stocks particularly hard. VMware’s stock fell nearly 43% from its 12-month high of $ 167.06, reaching October, before announcing a potential Broadcom purchase on Monday. Shares hit a one-year-to-date low of 19 91.53 on May 19, making them relatively cheap. The company is expected to report its first-quarter results on Thursday.
Fourth, Broadcom’s VMware purchases are expected to exceed 50 billion. According to data from Dealogic, it will rank as the second largest U.S. integration announced this year. Only
(MSFT) $ 75 billion Purchase Activation Blizzard (ATVI), announced in January, is even bigger. 41.3 billion offer for Elon Musk
(TWTR) is in third place.
Broadcom’s potential acquisition of VMware will be the third largest in the world, behind Microsoft’s Activation acquisition and
Alog 60 billion Housing Development Finance, an Indian housing finance company, says Dealogic.
Fifth, the agreement highlights that although the valuation of tech stocks has declined, they remain a bright spot in a deal market where overall transaction activity has declined. According to Dealogic, 3,463 U.S. contracts worth $ 814.8 billion have been announced since Monday this year, down 13% year-over-year.
Globally, the number of announced consolidations dropped nearly 21% to, 11,643, for a total of 1.7 trillion.
By 2022, half of the top 10 largest U.S. affiliates so far are in technology, according to Refinitive.
Write to Luisa Beltran at [email protected]