Broadcom said it will buy cloud computing company VMware in a $61 billion cash-and-stock deal – as part of its strategy to diversify its business into enterprise software.
Broadcom’s offer price of $142.50 per VMware share represents a premium of nearly 49 percent to the stock’s last close.Broadcom will also assume $8 billion of VMware’s debt.
The deal will almost triple Broadcom’s software-related revenue to about 45 percent of its total sales.
Broadcom will be validated as a major software player with the acquisition of VMware, Futurum Research analyst Daniel Newman said.
The agreement is a coup for Dell Technologies CEO Michael Dell, who spun VMware out of the computer maker last year.
Michael Dell owns 40 percent stake in VMware, while his financial backer Silver Lake, a private equity firm, owns 10 percent.
VMware will be allowed to solicit offers from rival bidders for 40 days as part of the agreement, Reuters news report said.
Broadcom took over business software firm CA Technologies for $18.9 billion and acquired Symantec’s security division for $10.7 billion. It also explored acquiring analytical software company SAS Institute Inc, but did not proceed with a bid.
Broadcom slashed costs at the acquired businesses. It cut the sales and marketing budgets of the CA and Symantec businesses from about 29 percent of their revenue to 7 percent.
VMware is dominant in the virtualization software market, allowing corporate customers to run multiple applications on their servers.
This business has started to slow down as companies have found new tools to operate through cloud computing, pushing VMware to seek new offerings, including through a partnership with Amazon.com.