UK greenlights Broadcom's $61B VMware takeover

Broadcom was today given a provisional OK from the UK Competition and Markets Authority (CMA) to close its $61 billion bid to acquire VMware, leaving only one major regulatory hurdle in the way of the deal: the US Federal Trade Commission.

Having completed its in-depth phase 2 investigation that began in March, the CMA said an independent panel determined the deal was unlikely to stifle innovation. Additionally, the four-person panel said any benefit to Broadcom by throttling VMware's functionality on rival hardware would be outweighed by a loss of business.

"It's important we investigate this deal to ensure that UK businesses continue to benefit from competition and innovation in the supply of server components. After carefully considering a broad range of evidence, we have provisionally found that this deal would not harm competition," said Richard Feasey, chair of the CMA's investigatory panel.

Broadcom's multi-prong appeasement strategy pays off

Broadcom has been trying to acquire virtualization biz VMware since May 2022, and both the CMA and the European Commission objected to the move – at least initially. 

In April, the European Commission filed a statement of objections that largely argued the same theory of harm as the CMA, namely that Broadcom would have free rein to degrade VMware performance by "delaying or degrading" access to VMware's hypervisor stack.

Just last week, however, the EU gave Broadcom's VMware buyout the nod after it made concessions to Marvell and other hardware rivals. Per the Commission, Broadcom agreed to access and interoperability commitments with other hardware makers that would ensure third-party Fibre Channel Host-Bus Adapters (FC HBAs) would continue to receive support.

Broadcom agreed to an irrevocable open source licensing of its current and future FC HBA drivers "to ensure interoperability with VMware's server virtualization software and allow them to reuse and modify Broadcom's drivers for its own use," the Commission said. 

In addition to concessions agreed to with the EU, Broadcom told the CMA recently that VMware was in danger of failure without a Broadcom buyout. Broadcom claimed in a highly redacted response to the CMA that VMware has long been unable to "satisfy enterprise demand," and that "Broadcom's investment will give VMware the scale … and support it needs to deliver on its potential."

The CMA's approval of the deal is provisional, meaning anyone wishing to speak their mind has until August 9 to contact the CMA before a final report and decision is issued no later than September 12.

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This is the second major merger fight the CMA has changed path on recently, with the UK regulator last week deciding to extend its investigation into Microsoft's $69 billion purchase of Activision Blizzard in light of concessions to Sony and the FTC's failure to get the merger blocked. 

Broadcom has received clearance for its VMware takeover in several other countries including Canada, Australia, and Brazil. Rumors of closed-door meetings between Broadcom and the FTC have been stirring since April. With the UK and EU's approvals, the US is the last remaining major hurdle to the deal.

The FTC told us it had no comment on the matter, leaving it open to speculation as to when the Commission would make a decision – if it's even in the mood for further battles after its recent Microsoft defeat and another failure to stop Meta's takeover of VR firm Within earlier this year. ®