Broadcom Inc. (NasdaqGS:AVGO) agreed to acquire VMware, Inc. (NYSE:VMW) from Michael Dell, Silver Lake Management, L.L.C., Silver Lake Partners V DE (AIV), L.P., SL SPV-2, L.P. and others for $61.1 billion.
Broadcom Inc. (NasdaqGS:AVGO) agreed to acquire VMware, Inc. (NYSE:VMW) from Michael S. Dell, Silver Lake Management, L.L.C., Silver Lake Partners V DE (AIV), L.P., SL SPV-2, L.P. and others for approximately $61.1 billion on May 26, 2022. As per the terms of the transaction, VMware shareholders will elect to receive either $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share. In addition, Broadcom will assume $8 billion of VMware net debt. The shareholder election will be subject to proration, resulting in approximately 50% of VMware’s shares being exchanged for cash consideration and 50% being exchanged for Broadcom common stock. Upon closing of the transaction, based on the outstanding shares of each company as of the date hereof, current Broadcom shareholders will own approximately 88% stake and current VMware shareholders will own approximately 12% stake of the combined company on a fully diluted basis. In connection with the transaction, Broadcom obtained commitments from a consortium of banks for $32 billion in new, fully committed debt financing. The agreement provides for a “go-shop” provision under which VMware and its Board of Directors may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals expiring on July 5, 2022. Following the closing of the transaction, the Broadcom Software Group will rebrand and operate as VMware.
The transaction is subject to the receipt of regulatory approvals and other customary closing conditions, including approval by VMware shareholders, Form S-4 shall have become effective under the Securities Act and any waiting period applicable under the HSR Act shall have expired or been terminated. The transaction has been unanimously approved by the boards of directors of both companies. As of May 26, 2022, Broadcom and Michael S. Dell entered into a voting agreement under which the Dell Stockholders agreed to vote all of their shares of VMware Common Stock in favor of the adoption of the Merger Agreement. The transaction is expected to be completed in Broadcom’s fiscal year 2023. The transaction is expected to add approximately $8.5 billion of pro forma EBITDA from the acquisition within three years post-closing.
Barclays Capital Inc., BofA Securities, Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC are serving as financial advisors to Broadcom. David C. Karp, Ronald C. Chen and Viktor Sapezhnikov of Wachtell, Lipton, Rosen & Katz and O’Melveny & Myers LLP are serving as legal counsel to Broadcom, and Cleary Gottlieb Steen & Hamilton LLP is serving as regulatory counsel. Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are serving as financial advisors and fairness opinion providers to VMware, and Barbara L. Becker, Saee Muzumdar and Andrew Kaplan of Gibson, Dunn & Crutcher LLP is serving as legal counsel. Michael Diz, Jennifer Chu and William Regner of Debevoise & Plimpton LLP acted as the legal advisor to JP Morgan. Bill Hartnett, Sean Davis and Dan Anderson of Cahill Gordon & Reindel LLP advised the financing sources in the transaction.
