Munich The chip manufacturer Broadcom is investing heavily to expand its software business: for $ 61 billion, the US group is swallowing the software provider VMware. Both companies announced this on Thursday. It is the biggest deal by a semiconductor company to date.
CEO Hock Tan will pay a premium of a good 40 percent on VMware’s closing price of May 20 for the shares. This was the last trading day before US media first reported on negotiations between the companies. A premium of this amount is quite common in the tech industry.
Broadcom relies on software like no other chip company. The Americans bought the software company CA Technologies four years ago and shortly afterwards a part of the security software provider Symantec.
CEO Hock Tan said on Thursday, “Building on our proven track record of successful acquisitions, this transaction connects our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software.“
The chip industry is booming like it hasn’t been for a long time. Last year, sales soared by a quarter. For this year, the market researchers again expect an increase of more than ten percent. The Broadcom boss, however, believes that the high flight is not permanent. The industry will return to the previously usual five percent plus per year, according to the manager. With the software, Hock Tan is therefore building a strong second pillar.
Third biggest tech Deal of all time
According to market researchers from Gartner, Broadcom is the sixth largest semiconductor company in the world with annual sales of just under $ 28 billion. The company, headquartered in California, specializes in communication chips.
VMware recently achieved annual sales of around $ 13 billion. The Group specializes in programs that virtualize the functions of network computers, the so-called servers, and manage and simplify applications in data centers. The company works closely with Amazon Web Services, the fast-growing IT subsidiary of Amazon.
The acquisition is not only remarkable for the semiconductor industry. It is also the third largest deal in tech history overall. Just a few months ago, Microsoft bought video game provider Activision for $69 billion. In 2016, Dell acquired EMC for $67 billion.
Michael Dell is a major shareholder
In the current acquisition Dell founder Michael Dell is also involved, as is EMC. The 57-year-old owns about 40 percent of VMware and is Chairman of the Board of Directors. The software company had come to Dell with the acquisition of EMC. The PC manufacturer split it off half a year ago by share exchange, Michael Dell got a big share package.
VMware shareholders can choose between $142.50 in cash per share or 0.252 Broadcom shares. Broadcom has secured $32 billion in loan commitments for the transaction.
