US chipmaker Broadcom is poised to receive conditional approval from the European Union’s antitrust authority for its proposed $61 billion acquisition of cloud computing firm VMware. Sources familiar with the matter revealed that the approval will be contingent on Broadcom’s compliance with remedies to address competition concerns. The news of the impending approval has led to a surge in Broadcom’s shares, increasing by nearly 5 percent.
Conditional EU Approval: The European Commission’s clearance of Broadcom’s acquisition is subject to certain conditions aimed at ensuring interoperability with competitors and safeguarding healthy market competition. While the details of these remedies have not been disclosed, they are designed to address concerns raised by the EU antitrust watchdog. The decision on the deal is scheduled to be announced by July 17, and both Broadcom and the European Commission have refrained from commenting on the matter.
Impact on Broadcom and VMware: Broadcom’s shares experienced a notable increase of up to 5 percent in early trading, further bolstered by the news of the anticipated EU approval. At the end of the trading day, the shares were up 4.9 percent. Similarly, VMware’s shares also witnessed a positive response, rising by 2.7 percent. These market reactions reflect investors’ confidence in the potential benefits of the acquisition for both companies.
Addressing Competition Concerns: Among the remedies proposed, one key focus area is Broadcom’s Fibre Channel Host-Bus Adapters (FC HBAs), which are essential for connecting servers to storage in data centers using the fiber channel protocol. The remedy specifically aims to address concerns regarding potential competition issues with rival company Marvell Technology. Marvell Technology has not yet provided a comment on this matter.
Hurdles in the United Kingdom: Broadcom still faces a significant hurdle in the form of the British competition agency’s review. The agency is expected to announce its provisional findings on the deal next month, along with any potential remedies that may be required. Companies have expressed caution due to the Competition and Markets Authority’s (CMA) recent decision to block Microsoft’s Activision deal, even though the EU granted clearance. Therefore, the outcome of the CMA review remains crucial for Broadcom’s acquisition plans.
US Federal Trade Commission Investigation: In addition to the European Union and the United Kingdom, the US Federal Trade Commission (FTC) is also scrutinizing Broadcom’s proposed acquisition of VMware. The FTC investigation underscores the regulatory scrutiny surrounding the deal, as Broadcom aims to diversify its business into enterprise software. The outcome of the FTC’s investigation will provide further insights into the potential impact on the acquisition process.
Conclusion: Broadcom’s $61 billion acquisition of VMware is on track to receive conditional approval from the European Union, pending compliance with remedies to address competition concerns. The proposed acquisition represents a strategic move by Broadcom to expand its presence in the enterprise software market. As the company navigates through the regulatory processes in the EU, the United Kingdom, and the US, the outcome of these reviews will shape the future trajectory of Broadcom and its ambitions in the cloud computing and data center industry.
