Chipmaker Broadcom in talks to acquire VMware for $60 billion – sources

NEW YORK/STOCKHOLM, May 23 (Reuters) – Broadcom Inc (AVGO.O) is in talks to acquire cloud services provider VMware Inc (VMW.N) in a $60 billion deal that would further diversify the chipmaker’s business in enterprise software, people familiar with the matter said.

Broadcom is in talks to pay about $140 per share in cash and stock for VMware, the sources said. That’s a 46% premium to VMware’s stock value on Friday.

If negotiations prove successful, a deal could be announced as early as Thursday, when VMware is expected to report quarterly results, the sources added.

Bloomberg News first reported on the deal talks on Sunday, while The Wall Street Journal first reported on the terms of the acquisition on Monday. Broadcom and VMware did not immediately respond to requests for comment from Reuters.

VMware shares ended Monday up 25% at $119.43, while Broadcom shares closed down 3% at $526.36.

Broadcom manufactures a range of chips used in products ranging from mobile phones to telecommunications networks. Acquiring VMware would give it access to data centers where VMware’s technology is a mainstay for cloud customers.

“We believe an acquisition of VMware would be considered to make strategic sense; consistent with Broadcom’s focus on building a thorough enterprise infrastructure software strategy,” Wells Fargo analysts said. .

Broadcom CEO Hock Tan, a Malaysian-American billionaire, has been a prolific trader since taking over as helm of what was a small chipmaker in 2006. Steady acquisitions have helped transform the company into a a giant worth over $200 billion. Read more

Tan’s boldest move was trying to buy mobile chipmaker Qualcomm (QCOM.O) for $103 billion in 2017. This was blocked by US President Donald Trump, fearing it would give advantage to China in mobile communications.

After the effort failed, Broadcom moved its headquarters to San Jose from Singapore. It then bolstered its software offering by buying CA Technologies for $18.9 billion and Symantec’s security division for $10.7 billion.

“A VMware acquisition would roughly triple the size of Broadcom’s software segment, and bring the overall software mix to almost 50% for the combined company,” Bernstein analysts wrote in a note to clients.

Michael Dell is VMware’s largest investor with a 40% stake after the company spun off from Dell Technologies (DELL.N) last year. Private equity firm Silver Lake, which has previously invested in Broadcom, is VMware’s second largest shareholder with a 10% stake.

Reporting by Greg Roumeliotis in New York, Shivam Patel in Bengaluru and Supantha Mukherjee in Stockholm; Editing by Christian Schmollinger, Tom Hogue, Kirsten Donovan and Bernard Orr

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