Broadcom’s $61 Billion VMware Deal Gets Interim UK Clearance

Broadcom Inc.’s proposed $61 billion takeover of VMware Inc. was provisionally waved through by the UK’s antitrust watchdog, easing the path toward one of the largest technology deals in history.

(Bloomberg) — Broadcom Inc.’s proposed $61 billion takeover of VMware Inc. was provisionally waved through by the UK’s antitrust watchdog, easing the path toward one of the largest technology deals in history.

The Competition and Markets Authority said it took an initial view that the deal wouldn’t substantially reduce competition in the supply of key computer server products, according to a statement published Wednesday after an in-depth review. Broadcom is still waiting for the US regulator, which is yet to decide whether to litigate on the deal.

The UK green light comes just days after the CMA appeared to rethink its tough stance on tech mergers by opening the door to new talks with Microsoft Corp. on its $69 billion Activision Blizzard Inc. deal.

VMware shares rose 5.8% in New York Wednesday morning. Broadcom slid 1.7%.

Broadcom, which announced the deal last year, makes a wide range of electronics, with its products going into everything from Apple Inc.’s iPhones to industrial equipment. VMware makes virtual software that allows users to access systems remotely. The companies don’t have overlapping products but are often used together.

Read More: Broadcom Gets EU Green Light for $61 Billion VMware Deal

The UK agency had considered whether the combination could harm rivals’ ability to work with VMware’s software but found that such a risk wouldn’t outweigh the potential lost business to Broadcom, according to the statement.

“Computer servers – often using the products of Broadcom and VMware – play a critical role in enabling us to work in the office or at home or to access TV shows or use banking services,” said Richard Feasey, the chair of the independent inquiry panel carrying out the investigation. “We have provisionally found that this deal would not harm competition.”

The agency follows the European Union which approved the deal on July 12. Broadcom agreed with the bloc to so-called behavioral remedies including promises to import interoperability standards into its technologies to allow rivals to compete more fairly.  

All eyes will now be on Lina Khan’s US Federal Trade Commission to see whether the agency will decide to litigate against the merger. A lawsuit against the tie-up is yet to be filed in the US.

The CMA has got tougher on the tech industry post-Brexit as it seeks to use its expansive powers to try and curtail some of the world’s biggest companies. It drew criticism for blocking Microsoft’s Activision deal despite the EU deciding that it could go through. It is now reconsidering its veto after fresh negotiations with the company.

With the Broadcom decision following so quickly after the CMA’s change of stance on Activision, there will be close scrutiny on whether the agency is softening its tough approach. However, Alex Haffner, competition partner at UK law firm Fladgate, thinks that although the CMA will be wary of how its decision-making is viewed, it will likely stick to its view that each case needs to be judged independently. 

“Having had more of an opportunity to look at the evidence in some detail, the facts as presented suggest to the CMA that any competition concerns are less pronounced and so the merger should (provisionally) be allowed to proceed,” Haffner said in an email. 

The CMA will now consult on its interim findings and will issue a final decision on September 12. 

“We have always believed that our proposed acquisition will enable enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era,” a Broadcom spokesperson said. “We expect the transaction will close in Broadcom’s fiscal year 2023.”

(Updates share trading in fourth paragraph.)

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