Broadcom misses VMware deal closing date and pledges it will close 'soon'

The chipmaker is telling shareholders of both companies it now expects the deal to close “soon”

The day is here, but Broadcom has still not yet acquired VMware.

The 17-month saga continues.

In a joint statement issued on Monday, the two companies - which pledged the deal would close by 30 October - said they expect the deal to close "soon."

But they did not give a date.

"Broadcom Inc. and VMware, Inc today announced their expectation that Broadcom's acquisition of VMware, will close soon, but in any event prior to the expiration of their merger agreement," said the two companies in a prepared statement.

The outside date for the deal is 26 November, at which point VMware can walk away from the $61bn deal.

The deal has been approved - or at least not objected to - by regulators around the world, except China.

There, the government has reportedly not yet granted Broadcom CEO Hock Tan's request to merge the chipmaker with the world leader in virtualisation technology.

VMware shareholders voted in favour of the deal last December, and this month elected how they want to receive their windfall: Broadcom stock.

96 per cent of VMware stockholders of record elected to received shares of California-based Broadcom with just four per cent opting for the $142.50 premium that Broadcom has offered.

Braodcom's May 2022 bid for VMware has passed regulators in Australia, Brazil, Canada, the European Union, Israel, Japan, South Africa, South Korea, Taiwan, the UK, and foreign investment control clearance in all necessary jurisdictions.

"There is no legal impediment to closing under US merger regulations," Broadcom said Monday.

This is after the US Federal Trade Commission carried out a second-request investigation that began in July 2022 and ended without objections.

The FTC had blocked Broadcom's 2018 bid for Qualcomm and called the company's sales tactics "illegal" in 2021.

When did this all start?

On 26 April 2022, Hock Tan's assistant called Dell Technologies founder, Chairman and CEO Michael Dell's assistant to set up a meeting.

The two met following Dell Technologies World that year and Tan made his bid for the company.

On 26 May 2022, Broadcom announced the merger, the $61bn offer, and its $142.50 premium price for VMware shares.

VMware shareholders approved the deal in December. However, regulators were only just starting their examination of how the merger potentially could hurt the technology market.

What has taken this long?

The deal weds one of the largest chipmakers in the world, which supplies silicon to infrastructure manufacturers across the IT business environment from servers to mobile phones, with the largest virtualisation technology company in the world, boasting more than 200,000 customers.

Regulators took a hard look at the deal in Europe, where Broadcom's smaller competitor, Marvell Technologies, was a focus of concern for governments hoping to keep the chip giant from turning off access to VMware once the deal closes.

The European Commission began formally looking at the deal in December and eventually approved it, although with conditions that include Broadcom creating a fast-track dispute resolution process so its competitors, such as Marvell, have an avenue to complain should it keep VMware from the market.

What are VMware partners saying?

Broadcom has repeatedly told partners it is going to embrace the channel once it takes over VMware, despite its acknowledgement that it hasn't always done so.

Partners said the future of the company's channel, which has been through a modernisation last year and this year, with resellers expanding their services opportunities and multi-cloud capabilities around the VMware stack, remains great technologically.

However, it is unclear whether the commitment will remain post-close.

With little power over the deal, but substantial parts of their business reliant on virtualisation, partners have repeatedly said they hope Broadcom doesn't "screw up" VMware.

VMware layoffs?

An email for management that was leaked to Business Insider shows Broadcom will place the existing 38,000 employees into three buckets: staying, staying for a little while, or fired.

No numbers have yet been publicly talked about in terms of jobs being kept or eliminated and that includes leadership.

VMware CEO Raghu Raghuram has not said what he will do should the deal close.

When asked twice over the last 17 months if he would stay or go, he has said it is too soon to say.

He does have a "golden parachute" worth about $50m should he decide to exit.

Market performance?

VMware stock shot ahead of the $142.50 premium in July after European regulators signalled that they were going to approve the transaction.

Previously, the European Commission had issued public statements that detailed its concerns that the deal would hurt competitors by blocking Broadcom's competitors from accessing VMware. The stock reached $177.76 at close on 13 October.

However, as the 20 October deal date has approached without China's approval, the stock has shed value.

It closed at $146.60 Friday, off 17 per cent from earlier in the month. Broadcom stock is up 51 per cent year to date as of Monday morning.

Since the deal was announced in May 2022, Broadcom stock has increased in value from $583.28 to $838.36, an increase of 55 per cent.

VMware share prices have increased from $129.26 to $142.20 Monday, an increase of 10 per cent.