Broadcom’s year-long attempt to take over virtualisation software company VMware is a step closer after the EU gave conditional approval to the $61bn deal. The antitrust approval came after Broadcom made interoperability guarantees to rival chipmaker Marvell Technology. This includes source code and training material for some Broadcom products.
Semiconductor company Broadcom announced its move to take over VMware in May last year, but has faced an uphill battle convincing regulators and competition authorities that the acquisition should go ahead. The companies are not a natural fit, and analysts told Tech Monitor at the time that the move by Broadcom was a bid to diversify its portfolio.
Nonetheless, VMware clients voiced concerns they’d be forced to use Broadcom products if the deal were to go through, while Broadcom rivals including Marvell also raised opposition. The EU echoed some of the concerns including over the potential for the two companies to “restrict competition in the market for certain hardware components which interoperate with VMWare’s software”. Broadcom denies this will be the case and has made assurances to regulators.
Gaining the antitrust approval from the EU required Broadcom to “guarantee access to the interoperability APIs as well as to the materials, tools and technical support necessary for the development and certification of third-party FC HBAs,” the EU said.
European Commissioner Margrethe Vestager said: “The commitments offered by Broadcom will enable its only rival Marvell, to continue competing on equal footing and ensure a similar protection for any future entrants.”
Broadcom has also agreed to adhere to standards in its technology that will allow other companies to compete with it and VMware. The aim of the EU antitrust investigation was the ensure the deal didn’t lead to higher prices, lower quality and less innovation.
US and UK still investigating
The US and UK are still investigating the merger and could require further commitments from Broadcom before giving approval. Broadcom says it is confident and has already had approval in many countries. “We continue to make progress with our various regulatory filings around the world, having received legal merger clearance in Australia, Brazil, Canada, the European Union, South Africa, and Taiwan, and foreign investment control clearance in all necessary jurisdictions,” the company said in a statement.
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The UK Competition and Markets Authority is expected to make a decision later this month and has a hard deadline of 12 September. It is unclear what decision the UK will make but it has so far taken a tougher stance on behavioural promises from tech companies during merger deals than the EU or the US.
The Federal Trade Commission (FTC) has remained tight-lipped on its issues with the deal but it appears Broadcom is happy to make concessions and promises to ensure the deal passes, and from statements made by the company it will fight for approval as it has done in the EU.
As part of the deal, Broadcom says it will also increase the VMware research budget by $2bn so it can develop new hybrid multi-cloud offerings. “The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era,” a spokesperson said.
