Broadcom, VMware Stocks Surge On Report Of European Deal Clearance
The European Commission tells CRN via email that it has ‘no comment on this,’ writing ‘the provisional deadline for the Commission to make a decision on this transaction is 17 July.’
Broadcom and VMware stocks are surging following a report that the $61 billion merger between the two companies has been given conditional approval by the European Commission, which has been involved in a deep-dive investigation of the deal since December.
Citing an anonymous source, Reuters said regulators and Broadcom reached an agreement over interoperability between the chip giant and its rivals, which also use VMware.
In an email, the European Commission told CRN it had “no comment on this.”
“The provisional deadline for the Commission to make a decision on this transaction is 17 July,” the commission wrote.
Representatives for VMware did not reply to a request for comment. Broadcom did not respond to CRN’s message for comment asking if it could confirm the report, however the company told Reuters it had no comment.
VMware’s stock premium on the deal is $142.50, however, the Palo Alto, Calif.-based virtualization all star has been mired in the $120s and $130s since the merger was unveiled. The Reuters report sent the stock soaring to $140.04, its highest price since October 2021, when issues with its managed pipeline emerged.
San Jose, Calif.-based Broadcom’s stock soared 6.08 percent on the Reuters report, up 49.02 points, although not yet back to its 52-week high of $921.78.
The European Commission has consistently said it was seeking assurances from Broadcom that it would not restrict its competitors’ access to VMware.
Those who spoke with Reuters said one key part of its bargain with regulators “focuses on Fibre Channel Host-Bus Adapters (FC HBAs) and is targeted at rival Marvell Technology (MRVL.O),” one of the people said.
In April, four months into its “Phase 2” investigation, the European Commission issued its “Statement of Objections” to the acquisition. In it, regulators echoed the concerns they had stated from the outset—namely, that Broadcom may interfere with the development of SmartNICs by rivals through its access to VMware’s software. In addition, the commission said it was concerned that Broadcom could stop offering VMware as a stand-alone product.
“The Commission has conducted a wide-ranging investigation to understand the market and the potential impact of the deal. This investigation has included, among others, analyzing internal documents provided by the parties and gathering views from server users and manufacturers, as well as from virtualization software suppliers,” the agency wrote.
“As a result of this in-depth investigation, the Commission is concerned that Broadcom may restrict competition in the global markets for the supply of FC HBAs and storage adapters by foreclosing competitors’ hardware by delaying or degrading their access to VMware’s server virtualization software.”
The merger has yet to pass regulatory hurdles in the U.S, where the Federal Trade Commission is nearly one year in to its deep “second request” investigation of the transaction, which it began on July 11, 2022.
Meanwhile, the U.K.’s Competition and Markets Authority has also not signed off on the merger.
During Broadcom’s latest earnings call, CEO Hock Tan said the proposed merger has received legal clearances in Australia, Brazil, Canada, South Africa and Taiwan. Canadian officials told CRN that while the deal has been approved there, authorities can still contest the merger for up to a year after it closes if it was found to result in anti-competitive practices.