U.S. chipmaker Broadcom Inc (AVGO.O) secured EU antitrust approval on Wednesday for its $61 billion proposed acquisition of cloud computing firm VMware, clearing a key hurdle in one of technology’s most significant deals ever. The deal still faces scrutiny elsewhere, including from Britain’s competition agency, which will announce its provisional findings about the transaction next month and possible remedies if needed.
The European Commission cleared the deal after Broadcom offered a set of interoperability commitments to help rival Marvell Technology (MRVL.O), which aims to ease concerns that the takeover could limit consumer choice. The remedies include guaranteed access to application programming interfaces and the materials, tools, and technical support needed to make FC HBA drivers operational for competitors. Marvell will also be guaranteed access to the source code for Broadcom’s current and future FC HBA drivers under an irrevocable open-source license.
“Broadcom is pleased to have received the European Commission’s conditional clearance of its proposed acquisition of VMware, which will help us accelerate the delivery of the industry’s most comprehensive data center and edge-computing platform,” the company said in a statement. Combining VMware’s software with Broadcom’s semiconductor and infrastructure software portfolio will enable customers to build, run and manage applications at scale across diversified, distributed environments.
Broadcom’s largest purchase will help the chipmaker diversify into enterprise software as it grapples with a slowdown in demand for its mainstay memory chips. It will also give it a bigger footprint in the booming market for data centers that run applications such as cloud computing, artificial intelligence, and virtual reality.
VMware has strong ties to every primary cloud provider. It is a big player in the nascent field of edge computing, which refers to devices used outside traditional data centers to connect to servers. These can be anything from smartphones to home appliances connected to the internet.
EU antitrust chief Margrethe Vestager will now consider the deal in light of the remedies and decide whether to approve it by July 17. Both the EU and Broadcom declined to comment.
Broadcom shares rose 5% in early trade after the news. The stock has risen 14% this year. Broadcom’s CEO, Hock Tan, is due to meet with EU regulators in Brussels on Friday to defend the deal, which has drawn concern from competitors and politicians on both sides of the Atlantic. A full-scale investigation by the EU’s competition authority is slated to end in December, though the deal could face delays and reversals if it is found to have restricted competition. Authorities in Brazil and Canada have approved the deal and await a decision in South Africa. O’Melveny is serving as legal adviser to Broadcom. Other counsel are Cleary Gottlieb Steen & Hamilton LLP, Wachtell, Lipton, Rosen & Katz, and Gibson, Dunn & Crutcher LLP.
