Silicon chip maker Broadcom is working on a cloud acquisition deal and virtualization provider VMware, although no agreement is expected to be inevitable, according to published reports.
VMware’s market capitalization is about $ 40 billion, although the proposed purchase price has not yet been revealed. If a deal is finally reached, it would be the latest in a long series of acquisitions for Broadcom, built largely on multiple high-profile buyouts.
The company acquired broadcaster Brocade in November 2016 for nearly $ 6 billion, security development and software firm CA Technologies in November 2018 for $ 19 billion and Symantec’s corporate security division in August 2019 for more than $ 10 billion.
However, the most aggressive acquisition of Broadcom was rejected by the Trump administration in 2017 due to alleged national security problems when it tried to buy a fellow chipmaker Qualcomm in a deal that would cost a whopping $ 117 billion.
Shares of Broadcom fell slightly in pre-market trading, while those of VMware rose – the latter rose by about 18% on Monday morning to $ 113, while the former fell by about 5% to $ 518.
Broadcom may need to offer a significant premium on the current share price of VMware to impose a deal, according to Bloomberg analysiswho noted that 40% of VMware shares are still owned by Michael Dell, head of the company’s former corporate parent, Dell Technologies, after the company was spun off from Dell in November 2021 – and other potential buyers may be appear now that the word is known that VMware can be sold.
Moreover, VMware’s overall estimate, given the average premium above the market price of shares paid to software companies over the past few years, could make it one of the most expensive purchases in history, said Bloomberg, the newspaper’s first newspaper. announced acquisition negotiations.
VMware’s board rejected a so-called “mini-auction” offer from a private investment company, TRC Capital, in January this year, a deal that would sell about 0.24% of TRC’s outstanding shares at sub-market prices. The idea behind these offers, according to VMware, is to avoid the disclosure requirements of the US Security and Exchange Commission, which would be triggered by bids for 5% or more of the company’s public shares.
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