Broadcom’s $69 billion VMware deal wins provisional UK clearance

LONDON (Reuters) -Britain’s competition regulator provisionally cleared U.S. tech company Broadcom’s $69 billion purchase of VMware on Wednesday, saying the deal would not weaken competition in the supply of critical computer server products.

The Competition and Markets Authority’s (CMA) provisional approval of the takeover – Broadcom’s biggest ever – follows a go-ahead from European Union regulators last week after Broadcom offered interoperability remedies to some rivals to address concerns.

“After examining the evidence gathered from Broadcom, VMware and other interested parties, an independent CMA panel has provisionally found the deal would not substantially reduce competition in the supply of server hardware components in the UK,” the CMA said.

The proposed deal has highlighted chipmaker Broadcom’s aim to diversify into enterprise software, but comes as regulators worldwide ramp up scrutiny of deals by Big Tech.

The British regulator, which had raised concerns in March that the deal could make servers more expensive, said it would now consult on its provisional approval before issuing a final report by Sept. 12.

Broadcom welcomed the unconditional approval, saying it expects to close the deal in the current fiscal year.

The CMA said it explored concerns that the deal could harm the ability of Broadcom’s rivals to compete if the merged company were to make their products work less well with VMware’s server virtualisation software.

“The (CMA) panel found the deal would be unlikely to harm innovation, in particular since information about new product adaptations only needs to be shared with VMware at a stage when it is too late to be of commercial benefit to Broadcom.”

The $69 billion deal, consisting of $61 billion in equity and the rest in debt, is also being examined by U.S. Federal Trade Commission.

The CMA this year became the first major regulator to block Microsoft’s deal to buy “Call of Duty” maker Activision Blizzard, but has since said it could look again at a modified proposal. All sides involved are now working to resolve the dispute.

(Reporting by Muvija M and Paul Sandle; editing by William James and Jane Merriman)