Broadcom Inc’s proposed US$61 billion acquisition of cloud-
computing firm VMware Inc faces an extended EU review, after EU regulators warned that the deal could lead to “higher prices, lower quality and less innovation” for business customers.
European Commissioner for Competition Margrethe Vestager said in a statement on Tuesday that an initial investigation highlighted risks that “after the merger, Broadcom could prevent its hardware rivals to interoperate with VMware’s server virtualization software.”
Photo: Reuters
The EU set a new deadline of May 11 to review the deal, saying its decision to open an in-depth probe does not prejudge the final result of the investigation.
Broadcom last month formally sought EU approval for the deal after months of preliminary discussions with the European Commission’s merger team. The transaction marks the biggest-ever takeover for a semiconductor maker and extends an acquisition spree for Broadcom chief executive officer Hock Tan (陳福陽), who has built one of the largest and most diversified companies in the industry.
The deal also risks a review by the UK’s merger watchdog, which last month was calling for comments from interested parties, saying it wanted to see if the acquisition could result in a substantial lessening of competition in the British market.
An in-depth EU review was expected given the size of the deal, Bloomberg Intelligence analyst Jennifer Rie said.
“Product overlap shouldn’t be an issue,” she said in a note earlier this month. “Reports suggest conglomerate concerns may be the focus of the regulatory review, with VMware’s 79 percent market share last year and the stickiness of its virtual-server products potentially providing it pricing leverage over customers. We believe VMware could provide pricing guarantees to allay those concerns.”
Broadcom’s plan is the second blockbuster tech deal to face tough scrutiny from the EU’s antitrust arm. Microsoft Corp’s proposed US$69 billion takeover of games developer Activision Blizzard Inc is under investigation after regulators said they are concerned the software giant could thwart access to blockbuster franchises such as Call of Duty.
“We are making progress with our various regulatory filings around the world, having received legal merger clearance in Brazil, South Africa and Canada,” Broadcom said in a statement. “We continue to expect the transaction will close in Broadcom’s fiscal year 2023.”
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