The $69 billion merger between Broadcom and VMware is expected to close after China approved the deal
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US chipmaker Broadcom will complete its acquisition of cloud software company VMware on Wednesday, the two companies announced after China agreed to the $69 billion deal.
Beijing approved the merger with some “restrictive conditions,” its antimonopoly agency said in a statement on Tuesday. It was a sign that China was working to ease trade tensions with the US amid an overall slowdown in its domestic economic growth.
“Broadcom and VMware announced today that they have received all necessary regulatory approvals and intend to complete Broadcom’s acquisition of VMware on November 22, 2023,” it said in a joint statement shortly after Beijing’s announcement.
The Financial Times reported last month that Beijing is considering halting the mega-merger first announced in May 2022 after the US tightened rules to block China’s access to high-end chips.
Geopolitical tensions between Washington and Beijing have affected the speed of approval of the deal, people familiar with the situation in China say.
The meeting between Presidents Xi Jinping and Joe Biden this month at the APEC summit in San Francisco has raised hopes of a thaw in relations between the two superpowers, which have resumed high-level military communications and moved toward setting up a working group on have agreed on the fight against drugs.
China’s State Administration for Market Regulation, the last global regulator to approve the merger, said it held up the deal because it feared it would “eliminate or restrict competition.”
Beijing said its approval was contingent on the combined company not abusing its market position, including enabling interoperability between VMware’s servers and other third-party hardware providers.
The regulatory notice said the combined company would need to take “safeguards” to protect the “sensitive information” of Broadcom’s competitors.
It also warned that third-party hardware makers are currently providing VMware with “sensitive information” such as product plans that Broadcom could use to its advantage after the companies merge.
However, the conditional approval will help hedge funds such as Pentwater, Millennium and DE Shaw, which each hold more than $350 million worth of shares in VMware, according to recent disclosures in late September. The positions show how much Wall Street was betting on a successful completion of the deal.
The deal was expected to close earlier this month, but the deadline was extended to November 26th. Regulators around the world have already approved the deal, including in the EU, Canada, Brazil and South Africa.
In Britain, the Competition and Markets Authority addressed concerns that the deal could harm the competitiveness of Broadcom’s rivals if their products work less well with VMware’s software, or drive up the cost of computer servers. However, an in-depth investigation cleared the deal in August.
Additional reporting by Arash Massoudi in London
