Broadcom Inches Closer to Megabond Issue
EU approval paved the way for a proposed acquisition of VMware. Now Broadcom needs $32 billion to fund the deal.
Broadcom Inc. is moving closer to selling a potential jumbo investment-grade bond after scoring approval from the European Union’s (EU’s) merger officials for its $61 billion acquisition of VMWare Inc.
The European Commission gave the chipmaker the nod last Wednesday, after months of negotiations with the firms, paving the way for the world’s biggest-ever takeover for a semiconductor maker. Now the company will have to figure out how to fund the $32 billion of commitments it secured in 2022 to help pay for the deal.
“With this decision, the Commission recognizes the importance of this combination in enabling enterprises to accelerate growth and momentum in the multi-cloud ecosystem,” Broadcom said in a statement on Wednesday.
The approval comes after Microsoft Corp. on Tuesday won an unprecedented reconsideration from a U.K. regulator for its purchase of Activision Blizzard Inc., the largest gaming deal on record, less than an hour after securing the green light from a U.S. judge.
The debt commitments that Broadcom secured comprise the biggest blue-chip loan financing package for an acquisition since banks pledged $41.5 billion to fund the spinoff and merger of AT&T Inc.’s media business with Discovery Inc. in May 2021. Should Broadcom replace the debt with a bond offering, it would likely surpass Pfizer Inc.’s $31 billion transaction, which helped fund the purchase of Seagen Inc. with the fourth-biggest U.S. investment-grade bond sale ever, according to data compiled by Bloomberg.
“Though Broadcom’s absolute debt may nearly double, the components of debt financing could include a fair amount of five-year or shorter bank terms loans—versus 100 percent longer-duration public debt—to lower borrowing costs and further hasten the potential pace of debt reduction,” Bloomberg Intelligence analyst Robert Schiffmanwrote in a June note.
Broadcom and VMWare didn’t respond to requests for comment.
Broadcom’s 4.926 percent bond, due in 2037, rose over 1 cent on the dollar, to about 90.4 cents, as of 10:11 a.m. New York time, according to Trace data.
The UK’s Competition and Markets Authority will publish its own provisional findings into Broadcom’s record deal later this month, with a statutory deadline of September 12.
Broadcom has been working with Barclays Plc, Bank of America Corp., Credit Suisse Group AG, Citigroup Inc., Morgan Stanley, and Wells Fargo & Co. as financial advisers since the deal was announced in May of last year.
—With assistance from Caleb Mutua.
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