$69 billion Broadcom-VMware merger to be finalized after China approves deal

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US chipmaker Broadcom will finalize its acquisition of cloud software company VMware on Wednesday, the two companies said after China approved the $69 billion deal.

Beijing approved the merger with certain “restrictive conditions”, according to a statement released Tuesday by its anti-monopoly regulator, a sign that China is working to ease trade tensions with the United States amid a broader slowdown in its domestic economic growth.

“Broadcom and VMware announced today that they have received all required regulatory approvals and intend to complete Broadcom’s acquisition of VMware on November 22, 2023,” they said in a joint statement shortly after the announcement from Beijing.

This month’s meeting between Presidents Xi Jinping and Joe Biden at the Apec summit in San Francisco raised hopes of a thaw in relations between the two superpowers, who have resumed high-level military communications level and agreed to create a working group on the fight against narcotics.

The megamerger was initially scheduled to be finalized on Oct. 30, but was delayed by objections from China’s Foreign Ministry after the United States tightened rules to block the country’s access to high-end chips.

In recent months, Broadcom chief Hock Tan has mounted an intense lobbying campaign to convince Beijing, meeting with top science and technology officials, antitrust regulators and politicians.

Last Wednesday, Tan was given a seat next to Vice Foreign Minister Ma Zhaoxu at a lavish dinner hosted by U.S. companies for the Chinese president, according to photos and people familiar with the matter.

China’s state administration for market regulation said it had resumed review of the merger on Friday and that Broadcom on Monday submitted an additional “engagement plan” that would reduce the merger’s impact on the market, paving the way for approval of the deal.

Regulators around the world had already approved the deal, including in the EU, Canada, Brazil, South Africa and the UK, leaving Beijing as the final arbiter.

In a regulatory notice, Beijing said its approval was contingent on the merged entity not abusing its market position, including by allowing interoperability between servers from VMware and other third-party hardware vendors. He added that the combined company must take “protective measures” to protect “sensitive information” from Broadcom’s competitors.

However, the conditional approval will help hedge funds including Pentwater, Millennium and DE Shaw, which each hold stakes worth more than $350 million in VMware, according to recent stake disclosures made in late September. The positions show how much Wall Street bet on the deal succeeding.

Nearly all VMware shareholders have been in the unusual situation of not being able to trade their shares since late October, with Broadcom providing little information on the fate of the deal, only announcing that it would be “closed soon.” before a deadline. from November 26.

“Ultimately, Beijing could not let this deal become another casualty of U.S.-China technology competition without its efforts to improve the business climate suffering,” said expert Paul Triolo in Chinese technology within the consulting firm Albright Stonebridge.

Additional reporting by Arash Massoudi in London, Qianer Liu and Cheng Leng in Hong Kong

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