According to the Financial Times, Beijing is contemplating postponing the approval of the $69 billion acquisition of cloud computing firm VMware Inc. by U.S. chipmaker Broadcom Inc. This development is based on information provided by three anonymous sources knowledgeable about the situation.
The delay in approval is attributed to China’s State Administration of Market Regulation (SAMR), which has not yet given its consent to the deal. The report suggests that SAMR is likely to withhold approval due to recent, more stringent chip control measures introduced by the Biden administration in the United States.
This news had a significant impact on VMware, causing a 7.5% drop in its premarket trading as concerns mounted about potential delays in China’s approval of the deal. Neither VMware nor Broadcom provided an immediate response to Reuters’ requests for comments, and SAMR could not be reached for immediate comment either.
The report further notes that approval for mergers and acquisitions involving U.S. companies in China now necessitates additional consultations with the Ministry of Foreign Affairs and the State Council. This information is attributed to two individuals familiar with the ongoing discussions.
Back in May 2022, Broadcom announced its plan to acquire VMware in a deal totaling $61 billion in equity, with the remaining amount in debt. This represented a bold move by the chipmaker to diversify its business into the enterprise software sector.
Broadcom initially stated its expectation that the transaction would be finalized during the current fiscal year. Notably, the company had already received legal clearance for the merger in several countries, including Australia, Brazil, Canada, the European Union, South Africa, and Taiwan, in addition to foreign investment control clearance in all the necessary jurisdictions by July.
It’s worth mentioning that the deal underwent scrutiny by the UK’s Competition and Markets Authority (CMA), which approved it following an in-depth investigation. Furthermore, the chipmaker obtained EU antitrust approval earlier this year by offering remedies to address concerns related to rival Marvell Technology, ensuring fair competition between the two companies.
China has been closely monitoring transactions involving chipmakers, as demonstrated by Intel Corp’s decision earlier this year to abandon its $5.4 billion deal to acquire Israeli contract chipmaker Tower Semiconductor Ltd, due to the expiration of their merger agreement without receiving regulatory approval from China.
