NEW YORK, May 26 — Broadcom announced today a US$61-billion (RM268-billion) deal to purchase cloud computing firm VMware in a giant tech transaction that expands the chipmaker’s software offerings.

The cash and stock deal — one of the biggest tech mergers ever — will merge chipmaker Broadcom’s software assets into those of VMware, a leader in cloud computing and virtualization technology.

The combination is designed to boost Broadcom’s offerings to customers enabling "greater choice and flexibility to build, run, manage, connect and protect applications at scale across diversified, distributed environments,” said a joint press release from the companies announcing the deal.

Led by chief executive Hock Tan, Broadcom has grown by acquisition, reporting fiscal 2021 revenues of about US$27.5 billion.

In 2017, Broadcom made an unsolicited offer to acquire rival chipmaker Qualcomm for US$117 billion, but the transaction was blocked by then-president Donald Trump’s administration on national security grounds. Qualcomm’s activities are mostly in the United States, but it is based in Singapore.

The deal with VMware would dilute Broadcom’s dependence on semiconductor revenues amid concerns of "chip cycle peaking,” said a note from UBS that also alluded to concerns about higher debt levels due to the deal. Under the transaction, VMware shareholders can elect to receive either US$142.50 in cash or slightly more than one-fourth of a Broadcom share for each VMware share. That represents a premium of 49 per cent compared with VMware’s stock price Friday before news reports of the deal surfaced.

Broadcom will also assume US$8 billion of VMware debt.

VMware was spun out of Dell Technologies in 2021.

Michael Dell and private equity firm Silver Lake, who own 40.2 per cent and 10 per cent of VMware shares respectively, have signed in support of the deal so long as the VMware board backs the transaction, the press release said, Shares of VMware rose 0.9 per cent to US$121.65 in morning trading, while Broadcom gained 1.9 per cent to US$541.89. — AFP