Daily Management Review

Beijing Considers Postponing The $69 Billion Clearance Of VMware-Broadcom Agreement


Beijing is considering delaying the $69 billion acquisition of cloud computing startup VMware Inc. by American chipmaker Broadcom Inc., the Financial Times reported on Thursday, citing three people with knowledge of the situation.
According to the article, China's State Administration of Market Regulation has not approved the agreement and is probably going to hold off on doing so after US President Joe Biden's administration on Tuesday imposed stricter regulations on chips.
In premarket trade, VMware shares dropped 7.5% due to concerns that China would postpone the approval of a purchase.
There were no comments on the issue from VMware, Broadcom, and China's SAMR. 
According to the report, which cited two people involved with the discussions, China is now requiring further meetings with the State Council and the Ministry of Foreign Affairs before approving mergers and acquisitions involving US corporations.
In May 2022, Broadcom announced that it will buy VMware for $61 billion in cash and the remaining amount through debt. This was the chipmaker's most audacious attempt to go into the enterprise software market.
The American semiconductor manufacturer had previously stated that it was still expecting the deal to finalise during the current fiscal year.
According to the company's July announcement, Broadcom obtained legal merger clearance in Australia, Brazil, Canada, the European Union, South Africa, and Taiwan, as well as clearance for foreign investment control in all relevant jurisdictions.
The UK's Competition and Markets Authority (CMA) had already looked into the transaction and authorised it after a thorough inquiry.
In order for the two businesses to be able to compete on an equal footing, the chipmaker offered remedies to rival Marvell Technology (MRVL.O), and this year the EU antitrust authorities approved the deal.
China has kept a careful eye on transactions involving chip manufacturers. Intel Corp. cancelled its $5.4 billion acquisition of Israeli contract chipmaker Tower Semiconductor Ltd. earlier this year when their merger agreement expired without Chinese regulatory permission.