China has given its approval for the completion of the $69 billion acquisition deal between US chipmaker Broadcom and cloud software company VMware. The approval comes with some “restrictive conditions” set by China’s anti-monopoly regulator, indicating their efforts to ease trade tensions with the US amidst a domestic economic slowdown. The merger is set to close on November 22, 2023, as confirmed by a joint statement from both companies.
The delay in the deal was due to objections from China’s foreign ministry after the US imposed stricter rules to limit the country’s access to high-end chips. Broadcom’s CEO, Hock Tan, has engaged in an extensive lobbying campaign to win over Beijing, meeting with senior officials and regulators. The approval from Beijing came after Broadcom submitted an additional “commitment plan” to reduce the merger’s market impact.
While regulatory bodies in other countries, including the EU, Canada, Brazil, South Africa, and the UK, have already cleared the deal, China’s approval was the final step. The approval is conditional on the merged entity not using its market position improperly and ensuring interoperability between VMware’s servers and third-party hardware providers. The merged company will also be required to take protective measures to safeguard the sensitive information of Broadcom’s competitors.
The conditional approval brings relief to hedge funds such as Pentwater, Millennium, and DE Shaw, who have significant stakes in VMware. The approval also alleviates concerns for VMware shareholders who were unable to trade their shares since the end of October. However, little information has been provided by Broadcom regarding the details of the deal, except for the assurance that it will close soon.
Overall, this approval reflects China’s willingness to improve the business climate and avoid the negative consequences of intensifying US-China technology competition. It remains to be seen how the acquisition will unfold and its impact on the broader trade relationship between the two superpowers.
Frequently Asked Questions (FAQ)
1. What is the value of the Broadcom acquisition of VMware deal?
The acquisition deal between Broadcom and VMware is valued at $69 billion.
2. Why was the deal delayed?
The deal faced objections from China’s foreign ministry after the US imposed stricter rules limiting Chinese access to high-end chips.
3. What are the conditions set by China for the approval?
China’s approval comes with restrictive conditions, including the requirement for the merged entity to avoid abusing its market position, ensuring interoperability between VMware’s servers and third-party hardware providers, and protecting the sensitive information of Broadcom’s competitors.
4. Which countries have already cleared the deal?
Regulatory bodies in the EU, Canada, Brazil, South Africa, and the UK have already given their clearance for the Broadcom acquisition of VMware.
5. How does this approval benefit hedge funds and VMware shareholders?
The conditional approval brings relief to hedge funds such as Pentwater, Millennium, and DE Shaw, who hold significant stakes in VMware. Shareholders of VMware, who were unable to trade their shares since the end of October, also have a positive outlook for the deal’s successful closure.