Chipmaker Broadcom is in talks to buy VMware for up to bn 50bn
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US chipmaker Broadcom Software Group is in talks to buy VMware, which could have a huge impact on technology company Michael Dale, the company’s largest shareholder, the matter has been leaked to the public.
The deal, which could cost more than 50bn, will transform the Deal-Hungary Semiconductor Group into a variety of technology companies, from chips to cloud computing services.
VMware has long been considered one of the most important companies in the cloud computing industry. Large corporations use its services to manage private and public cloud networks as well as data centers.
But the fall in the company’s share price in recent years has pushed up takeover interest. VMware closed trading at $ 95.71 on Friday, giving the company a stock market capitalization of bn 40bn, down half of its 2019 peak and down 20 percent from where it traded earlier this year.
VMware and Broadcom declined to comment on the discussion, which was first reported by Bloomberg.
The VMware deal will be a huge boon for personal computer billionaire Dell, who in 2016 acquired the business with private equity firm Silver Lake in a 67bn acquisition of technology group EMC.
The deal was the largest in tech history and largely used VMware to finance more than bn 50bn in debt.
After the acquisition, Dell held an approximately 19 percent stake in VMware to the public and managed to separate Dell Technologies, its personal computer and technology infrastructure company. Last November, Dell Technologies withdrew its remaining 81 percent stake in VMware in a 12bn dividend from the company.
Dell, which is the chairman of VMware, owns about 36 percent of the company’s outstanding shares, according to Centio Data, as of the end of Friday, valued at about bn 15bn.
Hawk Tan, the Malaysian-American billionaire who led Broadcom, had been looking for a software deal for years after then-US President Donald Trump blocked his attempt to acquire chipmaker Qualcomm in 2018 for national security reasons.
Tan is known as the arch consolidator of the chip industry, but his area of interest was forced to change in part after it became clear that any further deals in the sector would face stiff opposition from competitors, regulators and enforcers.
Broadcom held talks with cybersecurity group Symantec in 2019 but negotiations broke down as the two sides could not reach an agreement on the valuation.
The possible merger between Broadcom and VMware underscores the active market for large technology deals, despite sharp declines in valuations this year due to inflation and fears that the Federal Reserve will raise interest rates.
Private equity firm Thoma Bravo has agreed to two major tech takeovers this year, and active investor Elliott Management has led the approved privatization of Nielsen and Citrix.
Microsoft is also working to complete the $ 75 billion takeover of gaming company Activision Blizzard, which was announced in January.