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European Commission approves Broadcom's US$61 billion bid for VMware with conditions

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2023-07-13

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The European Commission has officially granted its approval for Broadcom's ambitious US$61 billion acquisition of virtualisation software giant VMware, albeit with certain stipulations regarding access and interoperability.

When the colossal deal was first announced in May of last year, it was anticipated that regulatory scrutiny would be inevitable. In December, Europe unveiled plans for an extensive investigation, citing concerns about competition, while the United Kingdom followed suit in March. Meanwhile, the Federal Trade Commission (FTC) in the United States is currently conducting its own investigation into the matter.

Broadcom's interest in VMware arises from its strategic drive to diversify beyond hardware by expanding its presence in enterprise infrastructure software. The EC's primary concern revolved around the potential for Broadcom, as the provider of hardware components such as fibre channel host-bus adapters, storage adapters, and network interface cards, to impede competition in the hardware markets in which it currently operates if it were to acquire VMware.

In essence, the EC worried that Broadcom's ownership of VMware, which offers virtualisation software compatible with Broadcom's hardware, could lead to restricted or degraded interoperability between VMware's software and rival hardware providers such as Marvell, which develops similar fibre channel host-bus adapters.

Consequently, as a condition for approving the deal, the EC has mandated that Broadcom ensure guaranteed access and interoperability for rival hardware companies, including Marvell, with respect to the "APIs, materials, tools, and technical support" necessary to leverage VMware's virtualisation software. This commitment will be in effect for the next 10 years and will be overseen directly by the European Commission, with an appointed "independent trustee" tasked with monitoring compliance.

While the EC's approval may provide some indication of what lies ahead for the deal, it is by no means a definitive outcome, as demonstrated by recent regulatory investigations. A prominent example is Microsoft's billion-dollar acquisition of Activision, which was blocked in the United Kingdom, approved in Europe, and ultimately received a favourable ruling from a US judge just yesterday, dismissing the FTC's attempt to block the deal.

Although the Broadcom and VMware transaction has not yet crossed the finish line, today's development brings it one step closer to completion.

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