- Broadcom (NASDAQ:AVGO) is buying VMware (NYSE:VMW) for $61 billion.
- The deal represents a 44% premium to VMW’s closing price on May 20.
- That was the last day of trading before media started reporting the deal.
Let’s go over everything investors need to know about the deal between the two companies.
- Broadcom is paying $61 billion to bring VMware under its control.
- Investors in VMW stock have two options for how they want to be paid for the deal.
- The first is getting $142.50 in cash for each share of VMW stock that they own.
- The second is receiving 0.252 shares of AVGO stock for each VMW share the hold.
- Broadcom notes that the deal is subject to proration with 50% of VMW shares being tradable for cash and 50% for stock.
- It’s also worth pointing out that the offer from AVGo represents a 44% premium to VMW’s closing price on May 20.
- This was the last day of trading before reports of the deal started to spread.
- When the deal closes, holders of AVGO stock will own 88% of the company with VMW shareholders owning the remaining 12%.
- Another thing to note is that the deal has Broadcom assuming $8 billion in debt held by VMware.
- AVGO expects the deal to add $8.5 billion of pro forma EBITDA within three years of closing.
- The deal needs to go through customary closing conditions ahead of its completion.
- That includes getting approval from regulators and shareholders.
- This has the two companies expecting the deal to close in Broadcom’s fiscal 2023 year.
AVGO stock is up 3.1% and VMW stock is up 2.3% as of Thursday morning.
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On the date of publication, William White did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.