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EU OKs Broadcom acquisition of VMware, with strings attached

EU OKs Broadcom acquisition of VMware, with strings attached

Broadcom’s bid to buy up VMware clears a key regulatory hurdle with the conditional approval of EU authorities.

Credit: Dreamstime

The European Commission said that the proposed acquisition of VMware by Broadcom may go forward, thanks to an investigation that suggested that the market would not be harmed and the acquiescence to several conditions by Broadcom.

The Commission, in a statement issued Wednesday, said that its investigation centered on answering the question of whether Broadcom, if it acquired VMware, would be in a position to harm the competitive balance of the marketplace in several key technology areas, including Fibre Channel host bus adapters, network interface cards, and storage adapters.

The investigation found that Broadcom didn’t have a strong enough position in the NIC and storage adapter markets, but noted that the proposed merger would let Broadcom harm its only rival for FC HBAs, Marvell, by making sure that VMware’s virtualization software didn’t work well with Marvell’s hardware.

However, the Commission said that Broadcom offered a commitment to interoperability by pledging to provide Marvell with API access to VMware’s virtualization products, among other commitments that led to today’s approval.

“Furthermore, Broadcom committed to implementing an organisational separation between the team working on Broadcom's FC HBAs and the team in charge of third-party certification and technical support,” the Commission said. “It also committed to ensuring protection of confidential information of Marvell and any potential entrant obtained in the context of the interoperability and certification processes.”

For its part, Broadcom insists that it would have taken these steps anyway, as interoperability is a “core principle” of the company, according to its own statement on the Commission’s decision.

“Broadcom did this to fully address the concerns expressed by the European Commission, and Broadcom welcomes the Commission's decision to accept this access remedy,” Broadcom’s statement said. The company said that regulators in Australia, Brazil, Canada, South Africa and Taiwan had all approved the merger, though the US and UK are both continuing to investigate the proposed deal.

The commitments by Broadcom are set to run for 10 years, and will be overseen by an independent trustee.

Broadcom first announced its intention to acquire VMware in May 2022, for approximately $61 billion in cash and stocks, along with assuming $8 billion in VMware net debt. It was, at the time, the culmination of a series of high-ticket acquisitions for the semiconductor maker, which bought up Brocade in 2016, CA Technologies in 2018, and Symantec’s enterprise security business in 2019 for a further total of $35 billion in merger spending.

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