Get Premium Data for Cyber Monday: Up to 55% Off InvestingProCLAIM SALE

Broadcom Reportedly in Advanced Talks to Acquire VMware, Analysts Mostly Positive

Published 05/23/2022, 01:40 AM
Updated 05/23/2022, 06:12 AM
© Reuters.  Broadcom (AVGO) Reportedly in Advanced Talks to Acquire VMWare (VMW), Analysts Mostly Positive
VMW
-
AVGO
-

By Senad Karaahmetovic

Broadcom (NASDAQ:AVGO) is in advanced talks to acquire VMware (NYSE:VMW), according to Bloomberg News.

VMW stock price jumped 19% premarket on this news while AVGO shares slipped over 3%. The cloud computing company had a $40.3 billion market cap on Friday, which could mean that a potential deal could easily eclipse the $50 billion handle, assuming the typical premium.

According to Bloomberg data, Michael Dell owns roughly 42% of VMW shares.

Here are comments from 4 Wall Street firms in response to Bloomberg’s report.

  • “An acquisition of VMware would be considered as making strategic sense; consistent with Broadcom’s focus on building out a deepening enterprise infrastructure software strategy.” - Wells Fargo
  • “Broadcom has stated publicly over the years it's interested in becoming an enterprise infrastructure provider, including software, where we believe VMware would be a strong fit in line with this longstanding strategy.” - KeyBanc
  • “VMware would not be "easy to swallow" as there are others that are more easily digested in our coverage. At today's current price and the ~$8.50/sh in cash, a typical ~30% takeout premium would suggest between $125-$135/sh with an assumption of the $12.7B debt. In all, this would equate to about a $62B EV or ~15x EV/CY23E FCF.” - Piper Sandler
  • “We believe an acquisition could potentially be in keeping with AVGO’s prior stated strategy of: 1) diversifying into mature enterprise software companies (such as prior acquisitions of Brocade, CA and Symantec Security); 2) reinvesting and focusing in core products, adding features and raising prices; and 3) divesting non-strategic/higher-risk growth initiatives. These strategies have historically lifted core EBIT margins of acquired assets significantly (current AVGO software EBIT margins >70% which is well above the EBIT margins of every software company in the S&P 500 index).” - Bank of America

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.