The American chip company offers 61 billion dollars for VMware.
(Photo: Reuters)
Munich The chip manufacturer Broadcom is investing heavily to expand its software business: the US group swallows the software provider VMware for 61 billion dollars. Both companies announced this on Thursday. It is the largest deal by a semiconductor company to date.
CEO Hock Tan is paying a premium of a good 40 percent to VMware’s closing price on May 20 for the shares. This was the last day of trading before US media first reported on negotiations between the companies. A surcharge of this magnitude is quite common in the tech industry.
Broadcom relies on software like no other chip company. The Americans bought the software company CA Technologies four years ago and shortly afterwards part of the security software provider Symantec.
CEO Hock Tan said Thursday, “Building on our proven track record of successful acquisitions, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic enterprise software pioneer and innovator.”
Top jobs of the day
Find the best jobs now and
be notified by email.
The chip industry is currently booming like it hasn’t been for a long time. Last year sales shot up by a quarter. For this year, the market researchers are once again expecting an increase of more than ten percent. The Broadcom boss, however, believes that the soaring will not last. According to the manager, the industry will return to the previous five percent plus per year. With the software, Hock Tan builds up a strong second mainstay.
Third-biggest tech deal of all time
According to Gartner market researchers, Broadcom is the sixth largest semiconductor company in the world with annual sales of just under $28 billion. The company, headquartered in California, specializes in communication chips.
With VMware, Broadcom wants to become less dependent on the chip market.
(Photo: Bloomberg)
VMware recently achieved annual sales of around 13 billion dollars. The group has specialized in programs that virtualize the functions of network computers, the so-called servers, and manage and simplify applications in data centers. The company works closely with Amazon Web Services, Amazon’s fast-growing IT subsidiary.
The takeover is not only remarkable for the semiconductor industry. It’s also the third-biggest deal in tech history overall. Just a few months ago, Microsoft bought video game provider Activision for $69 billion. In 2016, Dell acquired storage company EMC for $67 billion.
Michael Dell is a major shareholder
In the current takeover Dell founder Michael Dell is also involved, as is EMC. The 57-year-old owns around 40 percent of VMware and is chairman of the board of directors. The software company came to Dell with the acquisition of EMC. The PC manufacturer split it off by swapping shares six months ago, and Michael Dell received a large block of shares.
VMware shareholders can choose between $142.50 cash per share or 0.252 Broadcom shares. Broadcom has secured $32 billion in loan commitments for the transaction.
More: Infineon and the price roller coaster on the stock exchange: What is behind the caution of investors