US chipmaker Broadcom will complete its acquisition of cloud software company VMware on Wednesday, the two companies announced after China approved the $69bn deal.
Beijing approved the merger with some “restrictive conditions”, according to a statement from its anti-monopoly regulator on Tuesday, in a sign China was working to ease trade tensions with the US amid a broader slowdown in its domestic economic growth.
“Broadcom and VMware today announced that they have received all required regulatory approvals and intend to close Broadcom’s acquisition of VMware on November 22, 2023,” they said in a joint statement shortly after Beijing’s announcement.
This month’s meeting between presidents Xi Jinping and Joe Biden at the Apec summit in San Francisco has led to hopes of a thaw in relations between the two superpowers, which have resumed high-level military communications and agreed to establish a counter-narcotics working group.
The megamerger was originally set to close on October 30, but was held up by objections from China’s foreign ministry after the US tightened rules to block the country’s access to high-end chips.
In recent months Broadcom chief Hock Tan has staged an intense lobbying campaign to win over Beijing, meeting senior science and technology officials, antitrust regulators and politicians.
Last Wednesday, Tan secured a seat next to vice-foreign minister Ma Zhaoxu at a lavish dinner American businesses put on for the Chinese president, according to photos and people familiar with the matter.
China’s state administration for market regulation said it had resumed reviewing the merger on Friday and that on Monday Broadcom had submitted an additional “commitment plan”, which would reduce the tie-up’s market impact, clearing the way for the deal’s approval.
Regulators around the world had already cleared the deal, including in the EU, Canada, Brazil, South Africa and the UK, leaving Beijing as the final arbiter.
In a regulatory notice, Beijing said its approval depended on the merged entity not abusing its market position, including allowing interoperability between VMware’s servers and other third-party hardware providers. It added that the merged company must take “protective measures” to protect the “sensitive information” of Broadcom’s competitors.
However, the conditional approval will help hedge funds including Pentwater, Millennium and DE Shaw, which each hold stakes worth more than $350mn in VMware, according to recent disclosures made for holdings at the end of September. The positions show how much Wall Street has bet on the deal closing successfully.
Nearly all of VMware shareholders have been in the unusual position of being unable to trade their shares since the end of October, with Broadcom providing little information on the fate of the deal, other than saying it would “close soon” ahead of a final deadline of November 26.
“In the end, Beijing could not let this deal become another casualty of US-China technology competition without incurring costs to its efforts to improve the business climate,” said Paul Triolo, a China tech expert at consultancy Albright Stonebridge.
Additional reporting by Arash Massoudi in London, Qianer Liu and Cheng Leng in Hong Kong