Broadcom's (NASDAQ:AVGO) forthcoming $69 billion acquisition of VMware (NYSE:NYSE:VMW) is gaining momentum, with the majority of global clearances and necessary foreign investment consents in place. The deal is expected to conclude ahead of the expiration of their merger agreement. Despite the potential delay from China's regulatory approval, which introduces an element of uncertainty, the transaction has not encountered any legal obstacles in the U.S.
On Monday, Broadcom's share price saw a marginal uptick in premarket trading, settling at $842. This development comes as approximately 96% of VMware shareholders have elected to receive stock consideration over cash. As a result, around 52.1% of VMware shares are slated to be converted into Broadcom stocks, while the remaining 47.9% will be exchanged for cash.
The decision for merger compensation was finalized by VMware shareholders on October 23, 2023. Under the terms of the agreement, shareholders had the option to receive either $142.50 in cash or 0.2520 of a Broadcom share for each VMware share they held, with cash given in lieu of any fractional shares.
The merger transaction between the two technology giants has garnered widespread legal and investment approvals globally. For those interested in further transaction specifics, copies of the proxy statement/prospectus are available at no cost.
InvestingPro Insights
Broadcom's high earnings quality, with free cash flow exceeding net income, and consistent increase in earnings per share, are two key factors that make this merger enticing for investors. The company's market cap stands at a robust $346.02 billion as of Q3 2023, with a P/E ratio of 25.01. Its revenue growth for the last 12 months as of Q3 2023 was 11.91%, indicating a healthy financial position.
On the other hand, VMware operates with a moderate level of debt and has been profitable over the last 12 months. The company's market cap is $61.4 billion as of Q2 2024, with a P/E ratio of 42.83. Despite a declining trend in earnings per share, the company has impressive gross profit margins.
For those interested in delving deeper into the financials of these two companies, InvestingPro provides additional data and tips. For instance, there are 20 more InvestingPro Tips for Broadcom and 16 more for VMware.
For more detailed information, visit InvestingPro AVGO page and InvestingPro VMW page.
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