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European Union regulators are set to block Broadcom’s $69 billion acquisition of cloud software company VMware, leaving competition authorities in the United Kingdom and the United States as a handicap to finish one of its biggest technology acquisitions.
The European Commission, the European Union’s executive body, will say on Wednesday that it has accepted Broadcom’s prerogative that VMware will remain interoperable with competing hardware, four people familiar with the matter said.
The measure has proven sufficient to address the concerns of the Brussels competition authorities, without the need for Broadcom to sell off parts of the VMware business, those people said.
While regulators in Brussels are set to join counterparts in Canada, Brazil and South Africa in closing the deal, the takeover still faces competing investigations from the US, UK and China.
UK regulators opened an in-depth investigation and said the merger created a “realistic possibility” of weakening competition and could lead to “less innovation and more expensive computer parts and software” used by government, banks and telecoms companies. . The Competition and Markets Authority, which has had a stronger role in global technology acquisitions in recent years, will present its results by mid-September.
Broadcom agreed to buy VMware in May 2022 as part of a drive to turn the semiconductor group into a diversified technology company ranging from chips to cloud computing services.
But the deal has led to concerns from regulators that the purchase would hurt competition from rivals and drive up prices. Some VMware customers have raised concerns that they may be tied to purchasing only Broadcom services in the future.
Brussels made formal accusations in April that the deal could limit competition. As part of its defense, Silicon Valley-based Broadcom has convinced officials it has no incentive to stop its hardware competitors from working with VMware, people familiar with their thinking added.
The European Commission and Broadcom declined to comment.
Previously, Broadcom said it was working “constructively” with regulators and the deal was about enabling innovation and expanding choice in the marketplace.
Broadcom has been a go-getter since the company, originally known as Avago, went public in 2009. Its software deals include the $18.9 billion acquisition of CA Technologies and the $10.7 billion acquisition of security company Symantec. companies. VMware will be its largest deal yet, involving $61 billion in cash and stock as well as taking on $8 billion in debt.
Hock Tan, CEO of Broadcom, told the Financial Times this year that his M&A strategy is to “buy assets and better manage them,” while keeping the acquired businesses as independent product divisions.
He said maintaining VMware’s interoperability with a broad range of hardware vendors, a concern of regulators about the deal, was essential to keeping its products attractive to customers.
“The core value proposition for having VMware is that you should be able to virtualize every single piece of hardware in the data center,” said Tan. “The minute you start insulting or discriminating (or) neglecting parts of the hardware, you shoot yourself in the foot.”