Broadcom’s $69bn VMware deal wins UK provisional clearance

LONDON, July 19 (Reuters) – Britain’s competition watchdog provisionally cleared US technology company Broadcom (AVGO.O) $69 billion purchase of VMware (VMW.N) on Wednesday, saying the deal would not weaken competition in the supply of critical computer server products.

The provisional approval of the acquisition by the Competition and Markets Authority (CMA), the largest in Broadcom’s history, follows a go-ahead from European Union regulators last week after Broadcom offered interop fixes to some rivals to address concerns.

“After examining evidence collected from Broadcom, VMware and other interested parties, an independent CMA panel tentatively found that the deal would not materially reduce competition in the supply of server hardware components in the UK,” the CMA said.

The proposed deal has highlighted chipmaker Broadcom’s goal to diversify into enterprise software, but it comes as regulators around the world are increasing scrutiny of the deals by Big Tech.

The British regulator, which had expressed concern in March that the deal could make servers more expensive, said it would now consult on its provisional approval before issuing a final report by September 12.

Broadcom welcomed the unconditional approval and said it expects to close the deal in the current fiscal year.

The CMA said it explored concerns that the deal could hurt the ability of Broadcom’s rivals to compete if the merged company made its products work worse with VMware’s server virtualization software.

“The (CMA) panel found that the deal is unlikely to harm innovation, particularly as information about new product adaptations should only be shared with VMware at a stage where it is too late for it to be of commercial benefit to Broadcom.”

The $69 billion deal, consisting of $61 billion in equity and the rest in debt, is also under scrutiny by the US Federal Trade Commission.

This year, the CMA became the first major regulator to block Microsoft’s deal to buy “Call of Duty” maker Activision Blizzard, but has since said it might again consider a amended proposal. All parties involved are now working to resolve the dispute.

Reporting by Muvija M and Paul Sandle; edited by William James and Jane Merriman

Our standards: The Thomson Reuters Trust Principles.