Shares of VMware are experiencing a dip in trading today as concerns arise over the potential obstruction of its acquisition by Broadcom by Chinese regulators. Currently, VMware shares are down 7% to $166.34, having reached a low of $157.18.
Broadcom initially revealed in May 2022 its plans to acquire VMware for a staggering $61 billion in cash and stock. Additionally, Broadcom would also be taking on $8 billion of VMware's net debt. As part of the agreement, VMware shareholders have the option to receive either $142.50 per share in cash or 0.252 shares of Broadcom common stock, with half of the total payment expected to be in cash and the other half in Broadcom shares. Based on the current stock price of Broadcom, this amounts to an estimated $181.85 per share of VMware.
While Broadcom had previously stated its anticipation of closing the deal on October 30, with regulatory approvals, including China's, expected by that time, worries have arisen due to recent events. On Tuesday, Commerce Secretary Gina Raimondo announced that the Biden Administration would be imposing stricter restrictions on the sale of advanced semiconductors to China. Consequently, this has negatively impacted semiconductor and chip equipment manufacturers, such as Nvidia, down 4.7%, Intel, down 1.7%, and Advanced Micro Devices, down 1%.
There are also concerns that China may retaliate against U.S. businesses, potentially leading to the blocking of the VMware-Broadcom transaction, as well as other tech deals.
To date, representatives from both VMware and Broadcom have confirmed their expectation that the acquisition will proceed as scheduled on October 30.
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