By Samrhitha A and Anirban Sen
NEW YORK (Reuters) -Chipmaker Broadcom (NASDAQ:AVGO) is selling a unit that allows users to access desktops and applications from any device to private-equity firm KKR in a $4-billion deal to streamline its portfolio after the $69-billion purchase of VMware (NYSE:VMW) last year.
The end-user computing (EUC) unit will operate as a standalone company and will continue to be run by its existing management team led by Shankar Iyer, KKR said in a statement on Monday.
Shares of both Broadcom and KKR were up nearly 1% in early trading.
Reuters first reported on Saturday that a deal between KKR and Broadcom was imminent.
The VMware deal, which faced several regulatory hurdles, was among the biggest globally when it was announced in May 2022. Broadcom closed the acquisition more than a year later, in November 2023, after receiving regulatory approval in China.
After the deal closed, Broadcom said it would seek to divest the end-user computing unit. It is now also attempting to shed VMware's security software business, Carbon Black.
"KKR has traditionally been a very active investor in the enterprise software industry, and we have a differentiated point of view and playbooks that we can apply to help businesses (like Broadcom’s EUC unit) grow. So, we really coupled that kind of playbook with a long history in carve-outs," Bradley Brown, managing director on KKR's technology industry team said in an interview.
KKR has struck more than 60 carve-out deals in its history. Last year, it agreed to buy publishing house for $1.62 billion from Paramount Global.
The EUC deal marks KKR's latest bet in the technology services sector, which benefited from a bonanza in information technology (IT) spending during the COVID-19 pandemic, fueled by remote work.
In 2018, KKR purchased U.S. business software company BMC for $8.5 billion, and two years later, it combined BMC with Compuware, a company it acquired from technology-focused buyout firm Thoma Bravo.
In 2021, KKR acquired information services technology provider Ensono from private equity firms Charlesbank Capital Partners and M/C Partners for about $1.7 billion. Later in 2021, KKR and Clayton Dubilier & Rice agreed to buy Cloudera (NYSE:CLDR), taking the data-cloud firm private for about $5.3 billion.
Evercore, Deutsche Bank and Jefferies are advising KKR on the Broadcom EUC deal, while Citigroup is advising Broadcom. The transaction is expected to close in 2024.