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Broadcom banking on early EU approval of $61 billion VMware deal
Global Banking & Finance Review®
Company
By Foo Yun Chee
BRUSSELS (Reuters) – U.S. chipmaker Broadcom will seek early European Union antitrust approval of its proposed $61 billion buy of cloud computing company VMware by pointing to competition from Amazon, Microsoft and Google, people familiar with the matter said.
Announced in May, the deal is the second biggest globally so far this year and marks Broadcom’s attempt to diversify its business into enterprise software.
Tech deals have drawn intense scrutiny from regulators around the world concerned about power concentration in a few players and the possibility of bigger companies acquiring start-ups only to shut them down.
“This (deal) is creating more competition in the cloud market where there are very big players now. This doesn’t have to go to phase two at all,” one of the people said, referring to the European Commission’s four-month long second phase investigation.
“For the Commission to go to phase two, there has to be a real competition problem – horizontal, vertical, foreclosure risk – and I think we can show those risks don’t really exist in this case,” the person said.
Broadcom has yet to seek EU approval for the deal.
“We continue to make progress with our various regulatory filings around the world, with that work moving ahead as expected,” the company said.
In its review of Dell’s $67 billion acquisition of data storage company EMC Corp in 2016, the EU competition enforcer said EMC’s VMware had a strong position but not the ability nor the incentive to shut out competitors.
“In the last five years, what we have seen is an exponential growth of competitive pressure on VMWare on the part of those competitors that the Commission didn’t take into account,” another person said, referring to Amazon, Microsoft and Google, the top three cloud services providers.
“This should be a first phase investigation based on the facts,” the person said, referring to the EU preliminary merger review.
(Reporting by Foo Yun Chee; Editing by Josie Kao)
Antitrust approval is a legal process where regulatory authorities assess mergers and acquisitions to ensure they do not harm competition in the market.
A merger is a business combination where two companies join to form a single entity, often to improve efficiency, market share, or competitiveness.
Enterprise software is designed to meet the needs of an organization rather than individual users, often used for business operations like accounting, project management, and customer relationship management.
Cloud computing is the delivery of computing services over the internet, allowing for storage, processing, and management of data on remote servers instead of local machines.
Market concentration refers to the extent to which a small number of firms dominate a market, which can lead to reduced competition and higher prices for consumers.
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