VMware
shares are trading lower on Tuesday amid concerns that intensifying trade tensions between the U.S. and China could spur Chinese regulators to block the pending acquisition of the infrastructure software company by
Broadcom.
VMware shares are 7% lower at $166.34, and have traded as low as $157.18.
In May 2022,
Broadcom
(ticker: AVGO) announced a deal to buy
VMware
(VMW) for $61 billion in cash and stock, plus the assumption of $8 billion of net VMware debt.
Under terms of the agreement, VMware holders can choose to receive either $142.50 a share in cash, or 0.252 shares of Broadcom common stock, but with limitations — the combined purchase price is expected to be 50% in cash and 50% in Broadcom shares. At the current Broadcom stock price, that implies total consideration of about $181.85 per VMware share.
As recently as Aug. 21, Broadcom said it expected to close the deal Oct. 30, pending some required regulatory approvals, apparently including China, which it expected to receive by the closing date.
This morning, VMware and Broadcom representatives both told Barron’s that the company still expects the transaction to close on Oct. 30.
On Tuesday, Commerce Secretary Gina Raimondo said the Biden Administration is tightening its restrictions on the sale of advanced semiconductors to China. That news is pressuring shares of semiconductor and chip equipment manufacturers, with
Nvidia
(NVDA) down 4.7%,
Intel
(INTC) off 1.7% and
Advanced Micro Devices
(AMD) 1% lower.
There are also fears that China could find ways to retaliate against U.S. businesses—and that one option would be to block the VMware/Broadcom transaction and potentially other tech deals.
Write to Eric J. Savitz at [email protected]
Read the full article here