Broadcom’s $61 Billion VMware Deal Faces In-Depth EU Probe

Bloomberg

(Bloomberg) -- Broadcom Inc.’s projected $61 cardinal takeover of cloud-computing institution VMware Inc. faces an extended European Union review, aft EU regulators warned that the woody could pb to “higher prices, little prime and little innovation” for concern customers.

Margrethe Vestager, the EU’s antitrust chief, said successful a connection connected Tuesday that an archetypal probe highlighted risks that “after the merger, Broadcom could forestall its hardware rivals to interoperate with VMware’s server virtualisation software.” The EU acceptable a caller deadline of May 11 to reappraisal the deal, saying that its determination to unfastened an in-depth probe doesn’t prejudge the last effect of the investigation.

Broadcom past period formally sought EU support for the woody aft months of preliminary discussions with the European Commission’s merger team. The transaction marks the biggest-ever takeover for a semiconductor shaper and extends an acquisition spree for Broadcom Chief Executive Officer Hock Tan, who has built 1 of the largest and astir diversified companies successful the industry. 

VMware bolsters Broadcom’s bundle offerings — a cardinal portion of Tan’s strategy successful caller years. He acquired corporate-software shaper CA Technologies successful 2018 and Symantec Corp.’s endeavor information concern successful 2019.

The woody besides risks a reappraisal by the UK’s merger watchdog, which past period was calling for comments from funny parties, saying it wanted to spot if the acquisition could effect successful a important lessening of contention successful the British market.

An in-depth EU reappraisal was expected fixed the size of the deal, according to Bloomberg Intelligence expert Jennifer Rie.

“Product overlap shouldn’t beryllium an issue,” she said successful a enactment earlier this month. “Reports suggest conglomerate concerns whitethorn beryllium the absorption of the regulatory review, with VMware’s 79% marketplace stock successful 2021 and the stickiness of its virtual-server products perchance providing it pricing leverage implicit customers. We judge VMware could supply pricing guarantees to allay those concerns.”

Broadcom’s program is the 2nd blockbuster tech woody to look pugnacious scrutiny from the EU’s antitrust arm. Microsoft Corp.’s projected $69 cardinal takeover of games developer Activision Blizzard Inc. is nether probe aft regulators said they’re acrophobic the bundle elephantine could thwart entree to blockbuster franchises specified as Call of Duty.

“We are making advancement with our assorted regulatory filings astir the world, having received ineligible merger clearance successful Brazil, South Africa, and Canada,” Broadcom said successful a statement. “We proceed to expect the transaction volition adjacent successful Broadcom’s fiscal twelvemonth 2023.”

Broadcom’s drawstring of acquisitions has attracted opposition from rivals disquieted astir its expanding reach. That’s led to aggravated lobbying efforts aimed astatine scuppering further expansions and investigations and immoderate fines for its merchandise income strategy. 

The biggest setback Tan received came in 2018 erstwhile erstwhile President Donald Trump issued an enforcement bid halting his $117 cardinal effort to get Qualcomm Inc. That marked the extremity of its enlargement successful the semiconductor manufacture and led to his displacement to gathering a bundle business, which the determination for VMWare is portion of.