Broadcom and VMware Tie the Knot in $61 Billion Deal; Raising Broadcom FVE to $624

On May 26, narrow-moat Broadcom entered into a definitive agreement to acquire narrow-moat VMware in a cash-and-stock transaction that values VMware at $61 billion. VMware investors will receive $138.23 per share, made up of 50% received as $142.50 cash per VMware share and 50% received as 0.2520 shares of Broadcom stock. This represents a 44% premium to the closing price of VMware’s stock on May 20. Given our standalone fair value estimate for VMware is $175 per share, we think Broadcom shareholders are getting a good deal as management takes advantage of the recent technology sector sell-off and VMware’s temporary revenue growth headwinds stemming from transitioning from license to subscription and SaaS.