Computer chip and software maker Broadcom will spend about $ 61 billion ($ 86.1 million) to acquire cloud technology company VMware, one of the largest offerings of the year despite the increase in inflation and economic uncertainty.
The proposed deal comes just weeks after billionaire and Tesla CEO Elon Musk offered to spend $ 44 billion on Twitter. Dell Technologies split its controlling stake in VMware just 6 months ago.
Broadcom wants to establish a stronger place in the cloud computing marketplace, and VMware technology allows large corporations to combine access to the public cloud with the company’s internal networks.
The Broadcom software group will change the brand and function as VMware once the transaction is closed. The cash and stock agreement also includes $ 8 billion in net debt from VMware.
Under the proposed offer, VMware shareholders may choose to receive $ 142.50 in cash or $ 0.2520 of Broadcom common stock for each VMware share.
Michael Dell remains the chairman of VMware and owns 40.2% of the company’s outstanding shares. Dell Technologies completed the 81% spin-off of VMware in November.
Dell and Silver Lake, which owns 10% of VMware’s outstanding shares, have signed support agreements to vote in favor of the transaction, as long as VMware’s board continues to recommend the proposed deal.
The transaction includes a “go-shop” arrangement, so VMware can request, receive, evaluate, and potentially enter into negotiations with the parties offering alternative proposals over a 40-day period.
To help fund the transaction, Broadcom has secured commitments from a consortium of banks for $ 32 billion in fully committed new debt financing.
Broadcom’s current shareholders are expected to own approximately 88% and VMware’s current shareholders will own about 12% of the combined company.