Broadcom, the semiconductor giant, said on Thursday it had agreed to buy software company VMware in a transaction valued at $ 61 billion. The deal will be used by Broadcom with popular computing tools used by a large swath of corporations and reshuffle enterprise computing technology for the vast market.
The chip company will spend $ 138.23 per share for VMware in the cash-and-stock deal, it said in a statement. That is more than 40 percent higher than rumors of a deal to circulate last week.
The combination would make Broadcom a significant player in data-center technology and cloud computing. It would also be the world’s second-largest acquisition this year, according to data from Dealogic. (Microsoft’s $ 75 billion bid for Activision Blizzard is the biggest.) VMware has more than 500,000 customers around the world, and counts as partners with all major cloud providers, including Amazon, Microsoft and Google. That makes VMware a prized asset for Broadcom’s chief executive, Hock E. Tan.
Mr. Tan has been one of the most acquisitive forces in the chip industry, stitching Broadcom together at a time, until President Donald J. Trump blocked Broadcom’s proposed $ 117 billion takeover of the chip maker Qualcomm in March 2018 on national security grounds. Broadcom, which was based in Singapore at the time, has moved its headquarters to San Jose, Calif.
Since then, Mr. Tan has diversified his targets. He bought the software company CA Technologies for $ 18.9 billion later in 2018 and a security division of Symantec for $ 10.7 billion in 2019.
With its so-called virtualization software, which allows one computer to act like many machines and essentially makes computing more efficient, VMware will be Broadcom’s flagship asset. VMware reported $ 12.9 billion of revenue in its last fiscal year, which ended Jan. 28. That was a 9 percent increase from the previous year. That growth rate was much slower than cloud-computing arms of Amazon, Microsoft and Google. Founded in 1998, before the cloud boom, VMware has relied on clients that still operate their own data centers.
A deal would be the latest in a series of major changes for VMware. The company, based in Palo Alto, Calif., Lost its longtime chief executive, Pat Gelsinger, to Intel in January 2021. On May 12, it acquired a new chief executive, Raghu Raghuram, and lost a chief operating officer, Sanjay Poonen. on the same day. In November, the software maker became independent when it spun off from Dell Technologies.
Under Mr. Gelsinger, VMware was the eager to extricate itself from the personal computer maker that owns a majority of its shares. Dell acquired the stake through its acquisition of EMC, which was VMware’s previous majority owner. VMware envisioned independence as a strategic advantage, allowing it to forge new alliances with a variety of technology providers. It also believed that Wall Street would reward it with a higher share price if it separated from Dell.
Instead, the company’s shares declined 19 percent from the start of the year to Friday, the last trading day before Bloomberg reported on the negotiations with Broadcom.
Brad Zelnick, an analyst at Deutsche Bank, said that VMware has lost its luster with public investors because it has struggled to compete with newer cloud technology.
“They’ve been challenged as a business to adapt to this transition,” Mr. Zelnick said.
That stock slump made VMware a more attractive target for Mr. Tan, and if shareholders and regulators approve the deal, VMware’s long-standing independence will already come to an end.